'vw^j^r-'" 


OUTLINES 


POLITICAL  ECONOMY: 


A  REI'UKLICATION  OF  THE  ARTICLE  UPON  THAT  SUBJECT  CONTALNKD 

IN  THE  EDINBURGH  SUPPLEMENT  TO  THE  ENCYCLOPEDL\ 

BRITANNIC  A. 


TOGETHER  WITH 


MottH  3Bj:plumtov]»  sutr  (Krittcal, 


A  SUMMARY  OF  THE  SCIENCE. 


BY  REV.  JOHN  M'VICKAR,  A.  M. 

\ 

PROFESSOR  OE  MORAL  PHILOSOPHY  AND  POLITICAL  ECONOMV 
IN  COLUMBIA  COLLEGE,  NEW-YORK. 


WILDER  &  CAMPBELL,  BROADWAY 

1825. 


Southern  Distn^t  of  JVew-  York,  ss. 

BE  IT  REMEMBERED,  That  on  tlie  21st  day  of  July,  A.  D.  1825,  in  the  SOiii 
year  ot'  the  Independence  of  iho  United  States  of  America,  Wilder  and  Campbell,  of  the 
said  District,  have  deposited  in  this  office  the  title  of  a  book,  the  right  whereof  they  claim  as 
proprietors,  in  the  words  following,  to  wit : 

"  Outlines  of  Political  Economy:  being  a  republication  of  the  article  upon  t]:at  subject  coii- 
tain-^d  in  the  Edinburgh  Supplement  to  the  Encyclopedia  Britannica.  Together  with  Notes 
Explanatory  and  Critical,  and  a  Summary  of  the  Science.  By  Rev.  John  M'Vickar,  A.  M. 
Professor  of  Moral  Philosophy  an 3  Political  Economy  in  Columbia  College,  New- York." 

In  conformity  to  the  Act  of  Congress  of  the  United  States,  entitled  "  An  Act  for  the  en- 
couragement of  Learning,  by  securing  the  copies  of  Maps,  Charts,  and  Books,  to  the  authors 
and  proprietors  of  such  copies,  during  the  time  therein  mentioned."  And  also  to  an  Act, 
entitled  "  An  Act,  supplemenlary  to  an  Act,  entitled  an  Act  for  the  encouragement  of  Learn- 
ing, by  securing  the  copies  of  Maps,  Charts,  and  Books,  to  the  authors  and  proprietors  of 
such  copies,  during  the  times  therein  mentioned,  and  extending  the  benefits  thereof  to  the 
arts  of  designing,  engraving,  and  etching  historical  and  other  prints." 

JAMES  DILL, 
ricrk  of  the  Southern  District  of  J^ew-York. 


^'andcrpoo'J  &;  Cole,  Printer 


TO 

JAMES  WADSWORTH,  ESQ. 

OF  GENESEO,  N.  Y. 

Col  CollJuhf  19.  1825. 
Dear  Sir, 

I  know  not  to  whom  the  following  repubh- 
cation  can  with  greater  propriety  be  addressed, 
than  to  the  friend  at  whose  solicitation  it  was 
undertaken :  nor  by  whom  it  will  be  more  favour- 
ably received,  whether  regarded  as  an  attempt 
to  facilitate  in  our  country  the  study  of  Political 
Economy,  or  in  consideration  of  the  sentiments 
by  which  the  present  is  dictated. 

I  am. 

Respectfully  and  sincerely  yours, 

.T.  M'VICKAR. 


iVil6S540 


CONTENTS  OF  THE  ESSAY 


I'ART  I. — Definition-  and  History. 

Page 

Definition  of  the  Science 7 

Distinction  between  Value  in  Exchange  and  Utility      -         -  H 

Definition  of  the  term  Wealth  ...         -         -  9 

Importance  of  the  Science  ...---  11 

Causes  of  neglect  of  the  Science       ■...--  12 

Principles  of  the  Science — Nature  of  its  Evidence        -         -  ^  15 

Rise  of  the  Science  in  Modern  Europe         -         -         -         -  18 

Mercantile  System  -- 

Balance  of  Trade  _.._-.-  19 

Manufacturing  System        -------  20 

Progress  of  Commercial  Science  in  England  -         -         -  23 

Sentiments  of  Mr.  Mun  25 

"  Sir  Josiah  Child  .         .         -         -         -  26 

"  Sir  William  Petty " 

"  Sir  Dudley  North 28 

"  Mr.  Locke  - 30 

"  Mr.  Barbon  ------  " 

"  Dr.  Davenant       - 31 

"  Jacob  Vanderlint  .         .         .         -         .  " 

"  Sir  Matthew  Decker  -         .         .         -  32 

"  Mr.  Hume  - 33 

"  Mr.  Harris  ------  34 

Early  Italian  Writers  on  Commerce  .         -         -         -  " 

"      French         "  "  -         -         _         -  " 

System  of  French  Economists  .         -         .         _         .  35 

"  Quesnay  -------  " 

System  of  Adam  Smith      -         -         -         -         -         --  41 

Distinction  between  Politics  and  Political  Economy      -         -  48 

"  Statistics  "  -         -  49 

PART  II. — Production  op  Wealth. 

=5ect.  1.  Definition  of  Production 50 

Labour  the  only  Source  of  Wealth         -         -         -  51 

The  Earth  not  a  Source  of  Wealth         -         -         -  52 

Opinion  of  Hobbes       ------  " 

"  Locke         ------  53 

Sect.  2.  Means  by  which  the  Productive  Powers  of  Labour  may 

be  increased  ._-..--  56 

1 .  Security  of  Property  .  -  .  -  57 
Effects  of  Insecurity  -  -  .  -  60 
Case  of  the  Jews  -----  61 
Objections  of  Rousseau  and  Beccaria      -         -           62 

2.  Division  of  Labour       -----  64 

1.  Individual,  increases  skill  and  dexterity       -  65 
Saves  time       ------  " 

Facilitates  the  invention  of  Machinery        -  66 

Limited  by  the  extent  of  Market       -         -  67 

2.  Territorial  division  of  Labour  -  -  68 
Effect  in  augmenting  National  Wealth  -  70 
Sophism  of  French  Economists  in  relation  to 

Commerce  -----  '• 

3.  Money  ------  75 

3.  Accumulation  and  Employment  of  Capital  -  76 
Modes  in  which  Employment  of  Capital  facilitates 

Labour  ------  79 

1.  It  enables  us  to  produce  Commodities  that  could 

not  be  produced  without  it  -         -  '• 


COiNTENTS.- 


.2.  It  saves  Labour  in  the  production  of  Commo- 
dities ----.. 
3.  It  enables  us  to  execute  work  better  as  well  as 
quicker       ---_._ 
The  power  to  employ  Labour  depends  on  the  amount 

of  Capital 
Accumulation  of  Capital        -         -  -  .  . 

Advantage  of  High  Profits  -  -  .         . 

Parsimony  necessary  to  Accumulation 
Expenditure  of  Government  not  a  cause  of  Accumu- 
lation ---.... 
Sect.  3.  Different  Employments  of  Capital  and  Industry 
Employment  of  Capital  in  Agriculture 

"  "  Manufactures 

Necessity  of  Manufactures  to  Agriculture 
No  real  difference  between  them  -         .         . 

Opinion  of  Adam  Smith         -         -         .         .         . 
Nature   co-operates   with    Man  in  Manufactures  and 

Commerce  ---._. 

Employment  of  Capital  in  Commerce 
Advantage  of  Retail  Dealers         -         .         .  . 

Agriculture,  Manufactures,  and  Commerce,  equally  ad- 
vantageous --.__. 
Manufactures  not  a  cause  of  increased  mortality 
Division  of  Labour  does  not  degrade  the  Labourer 
Eulogium  of  Mr.  Malthus  on  Manufactures  • 
Rate  of  Profit  the  test  of  the  advantage  of  different  em- 
ployments             ...... 

PART  in. — Distribution  of  Wealth. 
Sect.  L  Preliminary  division  of  the  Produce  of  Industrv     - 

Quantity  of  Labour  the  regulating  principle  of  'S'alue 
Sect.  2.  Primary  Observations, 

Equality  of  Wages       ----.. 
of  Profits        ----._ 
Variations  of  demand  and  supply  exert  no  permanent 

influence  on  Price  -         -         -         _         . 

The  will  and  the  power  to  purchase,  necessary  to  con- 
stitute demand       ------ 

Cost  of  Production  the  regulating  principle  of  Price 
Reason  why  Gold  is  more  valuable  than  Silver 

"  Cottons  have  declined  in  Price    ' 

Competition  of  Producers  sinks  Prices 
Influence  of  Monopolies        -         -         .         -         , 
Average  Price  coincident  with  cost  of  production 
Opinion  of  Marquis  Garnier  -         .         .         . 

Sect.  3.  Nature,  Origin,  and  Progress  of  Rent 

Definition  of  Rent        ------ 

No  Rent  paid  on  the  first  settlement  of  a  Country 
Origin  of  Rent  -         -         -         .         . 

Progress  of  do.  -         -         -         .  . 

Objections  to  this  theory        -         .         -         . 
Land  which  yields  no  Rent  .         ^         -         , 

Payment  of  Rent  on  all  soils  not  inconsistent 
It  does  not  support  Landlords  without  Rent 

"  account  for  a  rise  and  fall  of  Price  the  same  way  125 

Distinction    between  Agriculture,  Manufactures,  and 

Commerce  -         -         -.       -         -         -         jog 

Tendency  of  Manufacturing  products  to  rise,  and  of 

Agricultural  to  fall  in  Price  -         -         -  <• 

Earth  compared  to  a  scries  of  Machines 
-rKor.  4.  Eflect  of  Capital  and  Wages  on  Exchangeable  Value, 
Value  of  Commodities  regulated  by  the  Labour  and 

Capital  expended  in  their  production 
Employment  of  Workmen  by  Capitalists  does  not  raise 

Die  price  of  Commodities  -        -        -        131 


Page 


80 


Ol 


S4 


94 
95 
96 

90 

99 

100 

101 

103 
105 


107 
108 

110 

111 
112 
113 
114 

115 
116 

118 
119 

120 

1 22 

123 
124 


1'; 


129 


CONTENTS).  HI 

Page 

Etfect  ol'  the  fluctuations  of  Wages  on  Exchangeable 

Value 132 

1 .  When  the  Capitals  are  of  the  same  degree  of  du- 

rability              -._...  " 

2.  When  the  Capitals  are  of  different  degree^  of  du- 

rability                134 

Goods  cliiefly  aflected  by  a  rise  of  Wages       -         -  135 

Profits  vary  inversely  as  Wages             .         .         -  136 

Method  of  estimating  the  effects  of  fluctuation        -  137 

General  rule  on  the  subject  of  all  fluctuations         -  138 

Confined  within  narrow  limits       .         .         -         -  139 

Cause  of  the  popular  opinion         ....  140 

Excliangeable  Value  does  not  depend  on  Capital  em- 
ployed         ---..--  141 
SJECT.  0.  Profits  and  Wages, 

Opinion  of  Adam  Smith  erroneous          .         -         -  145 
Decreasing  fertility  of  tlie  soil  the  principal  cause  of  a 

fall  of  profits         -         -         -         -         -         -  " 

Profits  depend  on  Proportional  Wages             -         -  149 
Low  Profits  in  Holland — Error  of  Sir  J.  Child  and 

Adam  Smitli          ------  151 

Low   Profits   cause   the  transfer   of  Capital  to  other 

countries       -------  152 

PART  IV. — CoNSTrMPTioN  of  Wealth. 

Definition  of  Consumption           -         -         -         -         -         -  155 

Consumption  the  end  of  Pioduction             .         _         -         -  « 

Test  of  advantageous  Consumption             -         .         .         .  157 

Luxury  not  disadvantageous        .         -         -                   .         .  158 
Adam  Smitli's  criterion  of  productive  and  unproductive  Con- 

siunption           __-_--.-  iQQ 
"              Distinction  between  the  different  classes  of  Society 

illfounded -  162 

Case  of  the  Physician        -------  165 

Public  Functionaries  productive  labourers            -          .         -  " 

Consumption  not  to  be  encouraged  as  a  stimulus           -         -  167 

Unproductive  Consumption  not  necessary  to  prevent  gluts     -  168 

Error  of  Montesquieu        -         -         -         -         -         -         .  171 

Consumption  of  Government              .         _         -         _         -  172 

Opinion  of  M.  Say             -------  175 

Conclusion        ---------  " 

Reference  to  the  Pritvcipal  Editorial  Notes. 

Prefatory  observations                 -             .             .             -  5 

Wealtli  and  Value          -             -              -              -              -  11 

Science  applied  to  Individual  Wealth     .             -             -  12 

Errors  of  the  Ancients                 -             -             -             -  14 

Connexion  between  Public  and  Private  Wealth              -  17 

Balance  of  Trade            -----  20 

Writers  on  Political  Economy     -              -             -              .  42 

Economical  Science  in  America               -              -              -  44 

Labour  not  the  sole  Source  of  Wealth              -             -  51 

Interest                ---...  59 

Power  of  subdivision  of  Labour            .             _             .  66 

Stock — Adam  Smith's  originality            -              _              .  67 

Union  of  Science  and  Morals      -              -              .              -  69 

Territorial  division  of  Labour              -             .             -  70 

Great  Britain  and  the  American  Colonies           -             -  72 
Articles  on  Political  Economy  contained  in  the  Supplement 

to  the  Encyclopedia  Eritannica        -             .              -  75 

.Money                -,-..-  76 

Immaterial  Capital         -             -             .             .             .  7g 

Canals                ---.-.  80 

Machinery          ----_.  go 

Impolicy  of  War            -             -             _             .             .  g4 

Which  most  operative.  Industry  or  Economy      -  •■ 


COiNTENTS. 

PaG£ 

Government  Expenditure  -  -  -  -  87 

The  liberal  views  of  Political  Economists  -  -  88 

Advancement  of  Wealth  -  -  -  -  89 

Exceptions  to  the  liberal  system  -  -  -  90 

fn  Agriculture,  in  what  sense  Nature  is  a  co-worker  with  Man     94 
Balance  of  Trade  -----  95 

Restriction  of  Auction  Sales       -  -  -  -  97 

Manufactures  _  _  .  _  .         102 

Equality  of  Profits         ...  -  -         104 

All  Value  not  resolvable  into  Labour  -  -         105 

Men  of  Science  ill  paid  ....         108 

Profits  equal  not  of  individuals  but  of  the  business         -         109 
Natural  and  Market  price  -  -  -  -         112 

Influence  of  demand  cind  supply  on  price  -  -         115 

Rent         .......         119 

Returns  from  Land         ...--" 
High  Profits  not  necessarily  the  result  of  no  Rent  -         121 

English  Husbandry,  why  unsuitable  to  our  new  Country         123 
Price  of  Agricultural   produce  regulated  by  demand  and 

supply  .._..-         125 

Error  of  French  Economists       ....         127 
Merits  of  Ricardo  -----         129 

Capital  not  to  be  confounded  with  Labour  -  -  131 

Ricardo's  subsequent  acknowledgment  -  -         135 

Real  and  Nominal  Wages  .._.«• 

Real  Wages         -  .  -  -  -  -         140 

Wages  and  Profits  not  to  be  confounded  -  -         142 

High  Profits  of  the  early  Colonies  ...         145 

Population  _...-."• 

Ricardo's  principle  limited         ....         149 
Confined  to  comparative   Profits  as  well  as  comparative 

Wages        .--...         150 
Taxation,  why  to  be  limited       ....         151 

Corn  Laws  of  England  .  .  .  _         152 

Change  of  English  Policy  -  .  -  .         154 

Capital  indefinite  in  form  -  -  -  -         155 

Commerce  productive  _-.."• 

Sumptuary  Laws  -  -  •  -  -  -         159 

Division  of  the  Classes  of  Society  ...         I6I 

Defence  of  Smith  .  -  -  -  .         164 

Good  management  equally  necessary  with  Economy      -  " 

Labour  dtrec^fy  and  tnrfired/y  productive  -  -         166 

True  Economy  of  Government  expenditure      -  -         167 

Progress  of  Population  in  the  United  States        -  -         168 

Cause  of  general  gluts  ....  169 

Means  of  supplying  Government  expenditures  -        172 

Additional  References  ....         176 

Summary  ......         177 

Conclusion  .-..-.         186 


PREFATORY  OBSERVATIONS.. 


The  following  article  is  from  the  pen  of  J.  R.  M'Culloch,  Esq. 
formerly  of  Edinburgh,  now  of  London,  in  which  latter  city  he 
has  had  the  honour  of  being  selected  as  the  first  Ricardo  Lectu- 
rer upon  Political  Economy. 

The  object  proposed  by  its  republication  is  the  diffusion,  in  a 
more  popular  form,  of  a  valuable  Essay  on  a  most  important 
subject  ;  and  it  has  been  undertaken  at  the  solicitation  of  men 
zealous  in  every  good  work.  It  is  republished  entire  and  with- 
out alteration,  the  original  extracts  from  ancient  and  foreign 
authors  being  retained,  and  a  translation  added,  an  addition 
obviously  required  by  the  nature  of  the  xmdertaking. 

For  the  tidelity  of  these  translations,  for  the  original  notes, 
being  those  marked  by  the  signature  E,  and  for  the  syllabus  at 
the  close,  the  Editor  is  responsible.  Where  he  has  the  misfor^ 
tune  to  differ  from  his  Author,  which  he  is  occasionally  com- 
pelled to  do,  the  reasons  by  which  he  has  been  led  to  it,  as 
well  as  the  authorities  which  support  him  in  it,  shall  be  stated, 
in  order  that  the  reader  may  be  enabled  to  form  an  independent 
decision  ;  the  object  of  the  Editor  being  rather  to  excite  in- 
quiry, and  create  a  popular  taste  for  these  studies,  than  to  dog- 
matize upon  them. 

For  readers  not  unpractised  in  the  science,  it  maybe  well,  in 
entering  on  the  ensuing  essay,  to  have  before  them  some  general 
view  of  the  distinctive  principles  which  have  gradually  separated 
from  the  Economical  School  of  Adam  Smith,  the  more  modern 
one  to  which  our  Author  is  attached,  and  which  generally  passes 
under  the  name  of  that  distinguished  writer,  to  whose  memory 
the  London  Institution  has  been  raised.  Among  the  fundamental 
positions  of  Adam  Smith,  which  have  since  been  controverted  or 
set  aside,  the  following  are  the  principal. 

1.  That  wealth  is  confined  to  material  products — consequently 
all  those  classes  of  society  who  are  not  engaged  in  such  pro- 
duction, are  to  be  regarded  as  mere  consumers  of  the  public 
wealth. 

2.  That  the  price  of  every  commodity  is  made  up  of  three  dis- 
tinguishable  portions,  viz.  rent  of  land,  wages  of  labour,  and 
profits  of  capital. 

3.  That  exchangeable  value  is  regulated  by  the  opposing  prin- 
ciples of  demand  and  supply — being  directly  as  the  former, 
and  inversely  as  the  latter. 

4.  That  the  decrease  of  profits  which  usually  accompanies  the 
progress  of  society,  arises  from  the  accumulation  of  capital  bcr 
ing  more  rapid  than  the  means  of  its  profitable  investment. 

1 


VI  PREFATORY    OBSERVATIONS. 

To  each  of  these  positions  the  superior  acuteness  of  modern 
analysis,  has  been  able  to  raise  objections  ;  these,  however,  are 
not  all  of  equal  strength,  and  while  the  admirers  of  Adam  Smith 
are  willing  to  acknowledge  the  inexpediency  of  the  limitation 
contained  in  the  first  position,  and  the  error  of  the  second,  they 
still  contend  for  the  practical  truth  of  the  third  and  fourth. 

The  principles  of  the  modern  school,  as  contradistinguished 
from  those  of  Smith,  may  be  thus  stated. 

1.  That  productive  labour  is  not  restricted  to  that  engaged 
in  material  products,  but  that  all  paid  labour  is  productive 
labour. 

2.  That  rent  forms  no  component  part  of  price — that  of  the 
raw  material  being  governed  by  the  labour  of  production  on 
land  that  pays  no  rent. 

3.  That  exchangeable  value  is  regulated  solely  by  the  quantity 
of  labour  worked  up  in  the  commodity. 

4.  That  the  decrease  of  profits  in  the  progress  of  society  arises, 
not  from  accumulation  of  capital,  but  from  the  increased  diffi- 
culty of  production  on  the  land,  or  in  other  words,  from  the 
necessity  of  resorting  to  inferior  soils,  as  population  presses 
on  the  means  of  support. 

In  his  additional  notes,  the  general  aim  of  the  Editor  has 
been,  to  supply  what  he  considered  requisite  to  render  this  es- 
say a  popular  compendium  of  the  science  to  which  it  relates. 
This  he  has  endeavoured  to  do, — 1.  By  explaining  and  illustra- 
ting whatever  to  the  unpractised  reader  might  appear  obscure. 
2.  By  a  fuller  statement  of  opposing  opinions,  and  an  ampler  re- 
ference to  authorities,  thus  enlarging  to  the  student  the  mate- 
rials for  a  candid  and  liberal  judgment : — and  3.  By  the  addition 
of  some  important  questions  which  have  been  either  altogether 
omitted  by  our  Author,  or  but  slightly  touched  upon. 

The  syllabus  with  which  it  closes,  is  intended  to  give  a  synop- 
tical view  of  the  science,  to  show  the  relation  and  harmonious 
connexion  which  subsists  between  its  various  parts,  to  render 
its  principles  familiar  to  the  understanding,  and  thus  give  to  the 
mind  that  acuteness  and  promptitude  in  their  practical  applica- 
tions, which  is  necessary  to  the  correction  of  error  and  the  de- 
tection of  sophistry. 

Col.  Coll,  JV.  F.  ^Oth  April,  1825. 


POJLITICAL.  ECONOMY. 


PART  I. 

DEFINITION  AND  HISTORY 

Dejinition  of  the  Science — Catises  of  its  being  neglected  in  Greece 
and  Rome,  and  in  the  Middle  Ages — Species  of  Evidence  on 
which  its  Conclusions  are  founded — Rise  of  the  Science  in  Mo- 
dern Europe Mercantile  System Progress  of  Commercial 

Philosophy  in  England  in  the  Seventeenth  and  Eighteenth  Cen- 
turies— System  of  M.  Quesnay  and  the  French  Economists — ■ 
Publication  of  the  "  Wealth  of  JVations'''' — Distinction  between 
Politics  and  Statistics  and  Political  Economy. 

Political  Economy*  is  the  science  of  the  laws  which  regidatc  Definition 
ihe  production,  distribution,  and  consumption  of  those  material  %cL^^^._ 
products  which  have  exchangeable  value,  and  which  are  either  ne- 
cessary, useful,  or  agreeable  to  man.^ 

This  definition  has  been  framed  so  as  to  exclude  all  reference 
to  such  articles  as  exist  independently  of  man,  and  of  which  un- 
limited quantities  can  be  obtained  without  any  degree  oi  labo- 
rious exertion.  Had  such  been  the  case  with  all  the  articles 
required  to  satisfy  our  wants,  and  to  gratify  our  desires,  this 
science  would  either  have  had  no  existence  at  all,  or  would 
have  been  cultivated  only  as  a  source  of  amusement,  without 
any  view  to  utility.  Political  Economy  is  exclusively  conversant 
with  objects  which  come  within  the  observation  of  every  man, 
and  which  are  continually  modified  by  human  interference.  It 
is,  in  fact,  the  science  of  values ;  and  nothing  which  is  not  pos- 
sessed of  exchangeable  value,  or  which  will  not  be  accepted  as 
an  equivalent  for  something  else,  can  come  within  the  scope  of 
its  inquiries.  It  is  obvious,  however,  that  an  article  may  be 
possessed  of  the  highest  degree  of  utility,  or,  as  it  is  sometimes 
termed,  of  intrinsic  worth,  and  yet  be  wholly  destitute  of  ex- 
changeable value.     Without  utility  of  some  species  or  another. 

*  Economy,  from  oIko;,  a  house,  or  family,  and  vofxo;,  a  law — the  govern- 
ment of  a  family.  Hence  Political  Economy  may  be  said  to  be  to  the  state 
what  domestic  economy  is  to  a  single  family. 

t  The  definition  of  a  science,  as  it  limits  its  inquiries,  is  consequently  all 
important.  Thus  tlie  definition  of  our  author  confines  it  to  material  pro- 
ductions ;  thereby  excluding  all  consideration  of  the  influence  exercised 
upon  national  prosperity,  by  science  and  professional  labours.  The  impor- 
tance of  these  considerations  will  be  afterward  shown  ;  at  present  it  is  suf- 
ficient to  point  it  out,  as  a  defect  in  the  definition.  The  latter  clause  is 
also  superfluous,  since  the  exchangeable  value  possessed  by  a  product,  is 
both  the  test  a:nd  the  measure  of  its  necessity,  utility,  or  agreeableness.  A 
better  definition  is  that  given  in  the  title  of  A.  Smith's  work — The  science 
which  relates  to  the  "  nature  and  causes  of  the  wealth  of  nations." — E. 


f-OLlTlCAL    ECONOMV. 


Ijistinction 
between 
Value  in 
Kxchange 
and  Utility. 


Ek&i^iiin;,  •  Jio  iii'iicle  !tviil-ever  be  an  oljject  of  demand  ;  but  how  necessary 
'  '  '  soever  any  particulnr  article  may  be  to  our  comfort,  or  even 
existence,  and  however  great  the  demand  for  it,  still,  if  it  be  a 
spontaneous  production  of  nature — if  it  exists  independently  of 
liuman  agency,  and  if  every  individual  has  an  indefinite  com- 
mand over  it,  it  can  never  become  the  subject  of  an  exchange, 
or  afford  a  basis  for  the  reasonings  of  the  economist.  It  cannot 
justly  be  said,  that  the  food  with  which  we  appease  the  cravings 
of  hunger,  or  the  clothes  by  which  we  defend  ourselves  from 
the  inclemency  of  the  weather,  are  more  useful  than  atmos- 
pheric air  ;  and  yet  they  are  possessed  of  that  exchangeable 
value  of  which  it  is  totally  destitute.  The  reason  is,  that  food 
and  clothes  are  not,  like  air,  gratuitous  products  :  they  cannot 
be  had  at  all  times,  and  without  any  exertion  ;  they  are  obtain- 
able only  by  labour ;  and  as  no  one  will  voluntarily  sacrifice  the 
fruits  of  his  industry,  without  receiving  an  equivalent  in  return, 
they  are  truly  said  to  possess  exchangeable  value. 

The  word  value  has,  we  are  aware,  been  very  generally  em- 
ployed to  express,  not  only  the  exchangeable  worth  of  a  com- 
modity, or  its  capacity  of  exchanging  for  other  commodities,  but 
also  to  express  its  utility,  or  its  capacity  of  satisfying  our  wants, 
and  of  contributing  to  our  comforts  and  enjoyments.  But  it  is 
obvious,  chat  the  utility  of  commodities — that  the  capacity  of 
bread,  for  example,  to  appease  hunger,  or  of  water  to  quench 
thirst — is  a  totally  different  and  distinct  quality  from  their  capa- 
city of  exchanging  for  other  commodities.  Dr.  Smith  perceived 
this  difference,  and  showed  the  importance  of  carefully  distin- 
guishing between  the  utility,  or,  as  he  expressed  it,  the  "  value 
in  use,"  of  commodities,  and  their  value  in  exchange.  But  he 
did  no't  always  keep  this  distinction  in  view,  and  it  has  been  very 
generally  lost  sight  of  by  M.  Say,  Mr.  Malthus,*  and  other  late 
writers.  We  have  no  doubt,  indeed,  that  the  confounding  to- 
gether of  these  opposite  qualities  has  been  one  of  the  principal 
causes  of  the  confusion  and  obscurity  in  which  many  branches 
of  the  science,  not  in  themselves  difficult,  are  still  involved. 
When,  for  example,  we  say  that  water  is  highly  valuable,  we 
unquestionably  attach  a  very  different  meaning  to  the  phrase 
from  what  we  attach  to  it  when  we  say  that  gold  is  valuable. 
AVater  is  indispensable  to  existence,  and  has,  therefore,  a  high 
degree  of  utility,  or  of  "  value  in  use  ;"  but  as  it  can  be  gene- 
rally obtained  in  large  quantities,  without  much  labour  or  exer- 
tion, it  has,  in  most  places,  but  a  very  low  value  in  exchange. 
Gold,  on  the  other  hand,  is  of  comparatively  little  utility  ;  but 
as  it  exists  only  in  limited  quantities,  and  as  a  great  deal  of  la- 
bour is  necessary  to  procure  a  small  supply  of  it,  it  has  a  high 
exchangeable  value,  and  may  be  exchanged  or  bartered  for  a 
large  quantity  of  most  other  commodities.     To  confound  these 


*  This  charge  against  Malthus  appears  to  be  unfounded :  on  the  con- 
trary, he  carefully  maintains  the  distinction,  "The  term  value"  says  he. 
••  is  so  rarely  understood  as  meaning  the  mere  utility  of  an  object,  that 
if  this  interpretation  of  it  be  retained  it  should  never  be  applied  witli- 
oiit  the  addition,  in  use." — Malthus^  Principlts,  Szc.  chap.  2.  Summari/. 
M.  Say,  it  is  true,  so  uses  it,  but  it  is  not  in  its  ordinary  sense,  but  as  a 
technical  term,  the  meaning  of  which  he  had  already  fixed  by  definition. — 
Say,  Book  I.  chap.  i.  These  arbitrary  definitions,  however,  are  a  source  y>i 
error,  and  therefore  to  be  avoided. — E. 


POLITICAL    ECONOJIV.  J 

clilierent  sorts  of  value  would  evidently  lead  to  the  most  errone-  Definition. 
ous  conclusions.  And  hence,  to  avoid  all  chance  of  error  from 
mistaking  the  sense  of  so  important  a  word  as  value,  we  shall 
never  use  it  except  to  signify  exchangeable  worth,  or  value  in 
exchange  ;  and  shall  always  use  the  word  utility  to  express  the 
power  or  capacity  of  an  article  to  satisfy  our  wants,  or  gratify 
our  desires. 

A  few  words  will  suffice  to  show  the  necessity  and  importance 
of  always  distinguishing  between  the  utility  of  a  commodity  and 
its  value.  If  utility  and  value  in  exchange  were  identical,  or  if 
they  were  regulated  by  the  same  laws,  it  would  necessarily  fol- 
low, that  the  same  circumstances  which  were  calculated  to  in- 
crease the  utility  of  any  article  would  also  increase  its  value, 
and  vice  versa.  But  the  fact  is  distinctly  and  completely  the 
reverse.  The  utility  of  a  commodity  is  never  increased  by 
simply  raising,  but  it  is,  in  the  great  majority  of  instances,  in- 
creased by  lowering  its  value.  A  deficient  harvest  increases 
the  exchangeable  value  of  corn,  but  most  certainly  it  does  not 
increase  its  utility.  If  such  an  improvement  were  to  take  place 
in  the  manufacture  of  hats  as  would  enable  them  to  be  produced 
for  a  half  of  the  expense  it  now  takes  to  bring  them  to  market, 
their  value,  and  consequently  their  price,  would  very  soon  be 
reduced  a  half  also.  Each  individual  would  thus  be  able  to 
buy  two  hats  for  the  same  sum  it  had  formerly  required  to  buy 
one  ;  and  while  the  utility  of  no  single  hat  would  be  impaired 
by  this  fall  of  value,  it  is  plain  that  the  sphere  of  their  utihty 
would  be  greatly  extended,  and  that  they  would  be  brought 
within  the  reach  of  a  large  proportion  of  those  whose  poverty 
might  previously  have  rendered  them  unable  to  obtain  them. 
In  fact,  the  grand  object  of  the  science  of  Political  Economy  is 
to  discover  the  means  by  which  the  value  of  commodities  may 
be  reduced  to  the  lowest  possible  limits.  For,  the  more  their 
value  is  reduced,  the  more  obtainable  they  become,  and  the 
greater,  consequently,  is  the  amount  of  the  necessaries,  conve- 
niences, and  luxuries  at  the  disposal  of  every  individual. 

Political  Economy  has  been  frequently  defined  to  be  "  the  DcfinitioTi 
science  which  treats  of  the  production,  distribution,  and  con-  "wealth.^"' 
sumption  of  wealth;''^  and  if  by  wealth  be  meant  those  material 
products  which  possess  exchangeable  value,  and  which  are  ne- 
cessary, useful,  or  agreeable  to  man,  the  defininition  is  quite 
unexceptionable.  But  the  economists  who  have  adopted  this 
definition  have  attached  a  different,  and  a  much  too  extensive 
meaning  to  the  term  wealth.  They  have  sometimes,  for  exam- 
ple, considered  wealth  as  synonymous  with  "  all  that  man  de- 
sires as  useful  and  agreeable  to  him,'''*    But  if  Political  Economy 

*  This  definition  is  that  ^ven  by  the  Earl  of  Lauderdale.  Though  inde- 
fensible as  the  subject  of  the  science,  it  is  yet  true  as  a  definition  of  wealth, 
in  the  sense  in  which  Lauderdale  employs  it.  He  distinguishes  between 
the  opulence  of  the  state  and  that  of  individuals ;  to  the  former  he  applies 
the  term  "  wealth,"'  to  the  latter  "  riches" — "  All  is  wealth  that  man  desires 
as  useful  or  delightful  to  him."  To  convert  it  into  riches  it  must  exist  in 
such  a  degree  of  scarcity  as  to  become  capable  of  appropriation.  Thus 
we  may  say  of  a  country  abounding  in  all  the  products  of  a  fertile  soil  and 
healthful  climate,  that  it  has  wealth  ;  but  whether  its  inhabitants  be  rich 
depends  on  their  comparative  numbers  and  power  of  exchange.  Italy  is  a 
wealthy  country,  Scotland  a  poor  one  ;  but  the  inhabitants  of  the  former 


JO  i'OLITICAL    ECONOMY. 

Definition,  vrere  to  embrace  a  discussion  of  the  production  and  distribuiion 
of  all  that  is  useful  and  agreeable,  it  would  include  within  itself 
every  other  science  ;  and  the  best  Encyclopaedia  would  really 
be  the  best  treatise  on  Political  Economy.  Good  health  is  useful 
and  delightful,  and,  therefore,  on  this  hypothesis,  the  science  of 
wealth  ought  to  comprehend  the  science  of  medicine  ;  civil  and 
religious  liberty  are  highly  useful,  and,  therefore,  the  science  of 
wealth  must  comprehend  the  science  of  politics  ;  good  acting  is 
agreeable,  and,  therefore,  to  be  complete,  the  science  of  wealth 
must  embrace  a  discussion  of  the  principles  of  the  histrionic  art, 
and  so  on.  Such  definitions  are  obviously  worse  than  useless. 
They  can  have  no  effect  but  to  generate  confused  and  perplexed 
notions  respecting  the  objects  and  limits  of  the  science,  and  to 
prevent  the  student  ever  acquiring  a  clear  and  distinct  idea  of 
the  nature  of  the  inquiries  in  which  he  is  engaged. 

Mr.  Malthus  has  defined  wealth  to  consist  of  "  those  material 
objects  which  are  necessary,  useful,  and  agreeable  to  man." 
(^Principles  of  Political  Economy,  p.  28.)  But  this  definition, 
though  infinitely  less  objectionable  than  the  preceding,  is  much 
too  comprehensive  to  be  used  in  Political  Economy.  Atmos- 
pheric air,  and  the  heat  of  the  sun,  are  both  material  pro- 
ducts, and  are  highly  useful  and  agreeable.*  But  their  inde- 
pendent existence,  and  their  incapacity  of  appropriation,  ex- 
cludes them,  as  we  have  already  shown,  from  the  investigations 
of  this  science.  .    . 

Dr.  Smith  has  not  explicitly  stated  what  was  the  precise 
meaning  attached  by  him  to  the  term  wealth  ;  but  he  most  com- 
monly describes  it  to  be  "  the  annual  produce  of  land  and  la- 
bour." Mr.  Malthus,  however,  has  justly  objected  to  this  de- 
finition, that  it  refers  to  the  sources  of  wealth,  before  we  know 
Avhat  wealth  is,  and  that  it  includes  all  the  useless  products  of 
the  earth,  as  well  as  those  which  are  appropriated  and  enjoyed 
by  man. 

The  definition  we  have  given  is  not  liable  to  any  of  these  ob- 
jections. By  confining  the  science  to  a  discussion  of  the  laws 
regulating  "  the  production,  distribution,  and  Consumption  of 
those  material  products  which  have  exchangeable  value,  and 
which  are  either  necessary,  useful,  or  agreeable,"  we  give  to 
it  a  distinct  and  definite  object.  When  thus  properly  restricted, 
the  researches  of  the  economist  occupy  a  field  which  is  exclu- 
sively his  own.  He  runs  no  risk  of  wasting  his  time  in  inqui- 
ries which  belong  to  other  sciences,  or  in  unprofitable  investi- 
gations respecting  the  production  and  consumption  of  articles 
which  cannot  be  appropriated,  and  which  exist  independently 
of  human  industry. 

Capacity  of  appropriation  is  indispensably  necessary  to  con- 
stitute wealth.  And  we  shall  invariably  employ  this  term  to 
distinguish  those  products  only  which  are  obtained  by  the  inter- 
are  poor,  of  the  latter  comparatively  rich. — Inquiry  into  the  J^ature  and 
Origin  of  Public  Wealth,  ch.  ii. — For  au  able  criticism  upon  it,  see  Edin- 
burgh Review,  Vol.  iv. — E. 

*  The  author  here  carelessly  uses  the  term  product  as  synonymous  with 
object,  whereas  product  in  the  language  of  this  science,  is  properly  confined 
to  the  results  of  human  labour,  something  produced  by  voluntary  not  by 
natural  agency.  Had  Malthus  used  the  term  product  instead  of  object,  the 
iriticism  passed  upon  him  by  our  author  would  have  been  inapplicable.— f^. 


POLITICAL   ECONOMV.  11 

vention  of  human  labour,  and  which,  consequently,  can  be  ap-  Definition. 
propriated  by  one  individual,  and  consumed  exclusively  by  him. 
A  man  is  not  said  to  be  wealthy,  because  he  has  an  indefinite 
command  over  atmospheric  air,  for  this  is  a  privilege  which  he 
enjoys  in  common  with  every  other  man,  and  which  can  form 
no  ground  of  distinction  ;  but  he  is  said  to  be  wealthy,  accord- 
.  ing  to  the  degree  in  which  he  can  afford  to  command  those  ne- 
cessaries, conveniences,  and  luxuries  which  are  not  the  gifts  of 
nature,  but  the  products  of  human  industry.  It  must,  however, 
be  carefully  observed,  that,  although  the  possession  of  value  be 
thus  necessary  to  the  existence  of  wealth,  they  cannot  be  con- 
founded together  without  leading  to  the  most  erroneous  conclu- 
sions. Wealth  and  value  are  as  widely  different  as  utility  and 
value.  It  is  plain  that  every  man  will  be  able  to  command  a 
much  greater  quantity  of  these  necessaries  and  gratifications,  of 
which  wealth  consists  when  their  value  declines,  or  when  they 
become  more  easily  obtainable,  than  when  their  value  increases. 
IVealth  and  value  vary  in  an  inverse  ratio.  The  one  increases 
as  the  other  diminishes,  and  diminishes  as  the  other  increases. 
— Wealth  is  greatest  where  the  facility  of  production  is  great- 
est, and  value  is  greatest  where  the  difficulty  of  production 
is  greatest.* 

m 

The  science  of  Political  Economy  is  exclusively  conversant  importance 
with  that  class  of  phenomena,  which  the  exertion  of  human  in-  scilifce. 
dustry  exhibits.  Its  object  is  to  ascertain  the  means  by  which 
this  industry  may  be  rendered  most  productive  of  necessaries, 
comforts,  luxuries,  and  enjoyments,  or  of  wealth  in  the  proper 
sense  of  the  word  ;  by  which  this  wealth  may  be  most  advan- 
tageously distributed  among  the  different  classes  of  the  society  ; 
and  by  which  it  may  be  most  profitably  consumed.  To  enter 
into  a  lengthened  argument  to  prove  the  importance  of  a  science 
having  such  objects  in  view,  would  be  worse  than  useless.  The 
consumption  of  wealth  is  indispensable  to  existence  ;  but  the 
eternal  law  of  Providence  has  decreed  that  wealth  can  only  be 
procured  by  the  intervention  of  industry — that  man  must  earn 
his  bread  by  the  sweat  of  his  brow.  This  twofold  necessity 
renders  the  production  of  wealth  a  constant  and  principal  object 
of  the  exertions  of  the  vast  majority  of  the  human  race.  It 
has  subdued  the  natural  aversion  of  man  to  labour,  giveii  acti- 

*  In  this  passage  there  may  appear  to  be  some  obscurity ;  its  princi- 
ples, however,  are  just : — Wealth  and  value  are  both  relative  terms — 
wealth  relates  to  persons,  value  to  things ;  wealth  refers  to  the  power 
individuals  possess  of  commanding  the  comforts  and  luxuries  of  life  ;  va- 
lue to  tlie  rate  of  exchange  existing  among  the  products  of  industry : — 
wealth  is  based  upon  plenty  of  commodities;  value  upon  their  scarce- 
ness. We  may  suppqse  a  state  of  society,  in  which  nature  producing  gra- 
tuitously all  that  can  be  desired,  wealth  would  abound,  but  value  would 
have  no  place :  as  labour  was  required  for  their  production,  wealth  would 
decrease  and  value  increase,  until  we  arrived  at  the  opposite  extreme, 
where  constant  labour  would  suffice  for  the  support  of  the  labourer  only ; 
in  which  case,  wealth  would  cease,  but  value  would  be  at  its  height. 

The  actual  state  of  society,  may  be  taken  as  a  variable  medium  between 
these  two  extremes,  and  partaking  of  the  character  of  both.  Commodities 
having  value  in  proportion  to  their  scarceness,  and  adding  to  wealth  in  pro- 
portion to  their  plenty  and  cheapness. — See  MaMns^  Principles  of  Politi- 
cal Economy^  ch.  6. — E. 


12 


POLITICAL   ECONOMY. 


Objects  and 
Importance 
of  the 


Causes  of 
the  Neglect 
of  this  Sci- 
piice  in  the 
Ancient  and 
jNliddleAgeB, 


vity  to  indolence,  and  armed  the  patient  hand  of  industry  willi 
zeal  to  undertake,  and  perseverance  to  overcome,  the  most  dif- 
ficult and  disagreeable  tasks.  But  when  wealth  is  thus  neces- 
sary, when  the  desire  to  acquire  it  is  sufficient  to  induce  us  to 
submit  to  the  greatest  privations,  it  is  plainly  impossible  to  doubt 
the  utili  y  and  paramount  importance  of  the  science  which 
teaches  the  modes  by  which  its  acquisition  may  be  facilitated, 
and  by  which  we  may  be  enabled  to  obtain  the  greatest  amount 
of  wealth  with  the  least  possible  difficulty.  There  is  no  class 
of  people  to  whom  a  knowledge  of  this  science  can  be  consi- 
dered as  either  extrinsic  or  superfluous.  There  are  some, 
doubtless,  to  whom  it  may  be  of  more  advantage  than  to  others  ; 
but  it  is  of  the  utmost  consequence  to  all.*  The  prosperity  of 
individuals,  and  consequently  of  nations,  does  not  depend  nearly 
so  much  on  salubrity  of  climate,  or  on  the  fertility  and  conve- 
nient situation  of  the  soils  they  inhabit,  as  on  the  power  pos- 
sessed by  them,  of  applying  their  labour  with  perseverance, 
skill,  and  judgment.  Industry  can  balance  almost  every  other 
deficiency.  It  can  render  regions  naturally  inhospitable,  bar- 
ren, and  unproductive,  the  comfortable  abodes  of  an  intelligent 
and  refined,  a  crowded  and  wealthy  population  ;  but  where  it  is 
wanting,  the  most  precious  gifts  of  nature  are  of  no  value,  and 
countries  possessed  of  the  greatest  capabilities  of  improvement, 
with  difficulty  furnish  a  miserable  subsistence  to  the  scanty  popu- 
lation of  hordes  distinguished  only  by  their  ignorance,  barba- 
rism, and  wretchedness. 

But  when  the  possession  of  wealth  is  thus  necessary  to  indi- 
vidual existence  and  comfort,  and  to  the  advancement  of  nations 
in  the  career  of  civilization,  it  may  justly  excite  our  astonish- 
ment that  so  few  efforts  should  have  been  made  to  discover  its 
sources,  and  facilitate  its  acquisition,  and  that  the  study  of  Po- 
litical Economy,  should  not  have  been  early  considered  as  form- 
ing a  principal  part  in  a  comprehensive  system  of  education. 
Two  circumstances,  to  which  we  shall  now  briefly  advert,  seem 
to  us  to  have  been  the  principal  causes  of  the  neglect  of  this 
science.  The  first  is  the  institution  of  domestic  slavery  in  the 
ancient  world  ;  and  the  second  the  darkness  of  the  period  w-hen 
the  plan  of  education  in  the  universities  of  modern  Europe  was 
first  organized. 

The  citizens  of  Greece  and  Rome  considered  it  degrading  to 
employ  themselves  in  those  occupations  which  form  the  princi- 


*  The  applicability  of  the  principles  of  this  science  to  the  advancement 
of  individual  wealth,  is  but  hinted  at  by  our  author  ;  it  deserves  to  have 
been  more  strongly  enforced.  It  is  the  great  merit  of  Say's  system,  that 
it  not  only  identifies  individual  wealth  with  that  of  the  nation,  but  also 
the  means  by  which  they  are  respectively  to  be  advanced.  Wealth  cannot 
be  produced  from  nothing,  but  then  every  man  derives  from  nature,  in 
some  proportion  or  other,  its  primitive  elements, — mental  ability  and  phy- 
sical strength ;  to  direct  them  to  its  production,  is  the  only  object  of  tliis 
science.  So  that  to  use  the  illustration  of  Say,  "  As  men  may  be  taught  to 
make  a  clock,  they  may  be  taught  to  make  what  is  called  riches."  Nor  is 
it  without  a  capital  that  any  healthy  young  man  sets  out  in  life.  The  ex- 
penses of  his  education  and  support  from  his  infancy,  are  to  him  an  accumu- 
lated capital — his  mental  acquirements  and  bodily  strength  are  their  result ; 
and  by  means  of  them  he  is  enabled  to  derive  an  interest  from  the  money 
that  has  been  thus  appropriated  in  his  favour,  and  laid  out  in  what,  whilo 
health  continues,  is  its  most  permanent  and  profitable  investment. — E. 


POLITICAL    ECONOMV,  1'3 

pal  business  of  the  inhabitants  of  modern  Europe.  In  some  of  Causes  of 
the  Grecian  states  the  citizens  were  prohil)ited  from  engaging  in  llrVomi^ai 
any  species  of  manufacturing  or  commercial  industry  ;  and  in  Economy. 
Athens  and  Rome,  where  such  a  prohibition  did  not  exist,  these 
employments  were  universally  regarded  as  mean,  mercenary, 
and  unworthy  of  freemen,  and  were  in  consequence  carried  on 
exclusively  by  slaves,  or  the  very  dregs  of  the  people.*  Agri- 
culture was  treated  with  more  respect.  Some  of  the  most  dis- 
tinguished characters  in  the  earlier  ages  of  Roman  history,  had 
been  actively  engaged  in  rural  afiairs  ;  but,  notwithstanding  their 
example,  in  the  llourishing  period  of  the  Republic,  and  under 
the  Imperial  Regime,  the  cultivation  of  the  soil  was  almost  en- 
tirely carried  on  by  slaves,  belonging  to  the  landlord,  and  em- 
ployed on  his  account.  The  mass  of  Roman  citizens  were  either 
engaged  in  the  military  service,t  or  derived  a  precarious  and  de- 
pendant subsistence  from  the  supplies  of  corn  furnished  by  the 
conquered  provinces.  In  such  a  state  of  society  the  relations 
subsisting  in  modern  Europe  between  landlords  and  tenants,  and 
masters  and  servants,  were  unknown  ;  and  the  ancients  were  iu 
consequence  entire  strangers  to  all  those  interesting  and  import- 
ant questions  arising  out  of  the  rise  and  fall  of  rents  and  wages, 
which  form  so  important  a  branch  of  economical  science.  The 
spirit  of  the  philosophy  of  the  ancient  world  was  also  extremely 
unfavourable  to  the  cultivation  of  Political  Economy.  The  lux- 
urious or  more  refined  mode  of  living  of  the  rich,  was  regarded 

*  The  force  of  the  prejudices  on  this  head  may  be  learned  from  the  fol- 
lowing quotations :  "  Illiberales  autem  et  sordidi,"  Cicero  says,  "  questus 
mercenariorum,  omniumque  quorum  opera,  non  quorum  artes  emuntur. 
Est  enim  illis  ipsa  merces  auctoramentum  servitutis.  Sordidi  etiam  pu- 
tandi,  qui  mercantur  a  mercatoribus  quod  statim  vendant,  nihil  enim  pro- 
Jiciunt,  nisi  admodum  maitiantur  I  Opificesque  omnes  in  sordida  arte  ver- 
santur,  ncc  enim  quidquam  ingenuum  potest  habere  officina  *  *  *  Merca- 
tura  autem,  si  tenuis  est,  sordida  putanda  est ;  sin  autem  magna  et  copiosa, 
multa  undique  apportans,  multisque  sine  vanitate  impertiens,  non  est  ad- 
modum vituperanda."  (De  Officiis,  Lib.  I.  sect.  42.)  "  The  gains  of  mer- 
chants, as  well  as  of  all  who  live  by  labour,  and  not  skill,  are  mean  and  illi- 
beral. Their  very  mercliandize  is  the  badge  of  their  slavery.  Those  persons 
also  are  to  be  esteemed  sordid  who  buy  from  merchants  that  they  may  im- 
mediately sell  again,  for  their  projils  can  be  made  only  by  falsehood.  All 
workmen  are  servilely  engaged,  nor  can  the  workshop  have  any  thi7ig  tvorthy 
of  a  freeman.  The  business  of  a  merchant,  if  contracted,  is  base,  yet  if  great 
and  extensive,  bringing  many  things  from  far,  and  without  vanity  distribu- 
ting them  to  many,  is  not  to  be  altogether  despised." — {Cicero  on  Morals.') 

"  Vulgaris  opificum,  quaj  manu  constant,  et  ad  instruendam  vitam  occu- 
patsEsunt;  in  quibus  nulla  decoris,  nulla  honesti  simulatio  est."  (^Senecce 
EpistolcE,  Ep.  89.)  "  The  business  of  workmen,  which  is  manual,  and  re- 
lates merely  to  the  conveniencies  of  life,  without  any  connexion  with  taste 
or  sentiment,  is  to  be  reputed  base." — (^Seneca'S  Letters.) 

A  hundred  similar  qv^otations  might  be  produced  ;  but  the  one  we  have 
given  from  Cicero  is  sufficient  to  establish  the  accuracy  of  what  we  have 
advanced.  The  strength  of  the  prejudice  against  commerce  and  the  arts  is 
proved  by  its  exerting  so  powerful  an  influence  over  so  cultivated  a  mind. 
For  a  further  discussion  of  the  opinions  of  the  Romans  on  this  subject, 
we  refer  our  readers  to  the  Dissertazione  del  Commercio  de  Romani  qJ' 
Mengotti,  which  received  a  prize  from  the  Academy  of  Paris  in  1787,  and 
to  the  Memoria  Apologetica  del  Commercio  de  Romani  of  Torres,  published 
at  Venice  in  1788. 

t  "  Rei  militaris  virtus  prffistat  cteteris  omnibus ;  haec  populo  Romano., 
hsec  huic  urbi  aeternam  gloriam  peperit." — (Cicero  pro  Murena.)  "  Mili- 
tary science  excels  all  other, — it  is  this  which  has  gained  eternal  glory  f*^'" 
ihiscity.  and  for  the  Roman  people." — (Cicero  for  Murena. ^ 


14 


I'OLITICAL    ECONOMY, 


Causes  of 
the  neglect 
of  Political 

Economy. 


by  the  ancient  moralists  as  an  evil  of  the  first  magnitude.  They 
considered  it  as  subversive  of  those  warlike  virtues,  which  were 
the  principal  objects  of  their  admiration,  and,  in  consequence, 
they  denounced  the  passion  for  accumulating  wealth  as  fraught 
with  the  most  injurious  and  destructive  consequences.  It  was 
ijnpossible  that  Political  Economy  could  become  an  object  of  at- 
tention, to  men  imbued  with  such  prejudices  ;  or  that  it  could 
be  studied  by  those  who  held  the  objects  about  which  it  is  con- 
versant in  contempt,  and  who  spurned  that  labour  by  which 
wealth  is  produced.''^ 

At  the  establishment  of  our  universities,  the  clergy  were  al- 
most the  exclusive  possessors  of  the  little  knowledge  then  in 
existence.  It  was  natural,  therefore,  that  their  peculiar  feel- 
ings and  pursuits  should  have  a  marked  influence  on  the  plans 
of  educf-'tion  they  were  employed  to  frame.  Grammar,  rhetoric, 
logic,  school  divinity,  and  civil  law,  comprised  the  whole  course 
of  study.  To  have  appointed  professors  to  explain  the  princi- 
ples of  commerce,  and  the  means  by  which  labour  might  be 
rendered  most  effective,  would  have  been  considered  as  equally 
superfluous  and  degrading  to  the  dignity  of  science.  The  pre- 
judices against  commerce,  manufactures,  and  luxury,  generated 
in  antiquity,  had  a  powerful  influence  in  the  middle  ages.  None 
were  possessed  of  any  clear  ideas  concerning  the  true  sources 
of  wealth,  happiness,  and  prosperity.  The  intercourse  between 
the  different  countries  was  extremely  limited,  and  was  rather 
confined  to  marauding  excursions,  and  a  piratical  scramble  for 
the  precious  metals,  than  to  a  commerce  founded  on  the  gratifi- 
cation of  real  or  reciprocal  wants. 

These  circumstances  sufficiently  account  for  the  slow  pro- 
gress of,  and  the  little  attention  paid  to,  this  science  up  to  a  very 
recent  period.  And  since  it  became  an  object  of  more  general 
attention  and  liberal  inquiry,  the  opposition  between  the  theories 
and  opinions  that  have  been  espoused  by  the  most  eminent  of  its 
professors, — a  necessary  and  inevitable  result,  as  we  shall  im- 
mediately show,  of  its  recent  cultivation — has  proved  exceed- 
ingly unfavourable  to  its  progress,  and  has  generated  a  disposi- 
tion to  distrust  its  best  established  conclusions.  This  prejudice 
is,  however,  extremely  ill-founded  ;  and  notwithstanding  the  di- 
versity of  the  theories  that  have  been  formed  to  explain  its  va- 

=''  From  the  ancients  although  we  have  but  little  written  on  this  science, 
yet  of  that  little  much  is  wrong.  Their  philosophers  taught  them  contempt 
of  wealth,  not  the  means  of  attaining  it.  Gold  and  virtue,  according  to  Plato, 
were  weights  in  opposite  scales  ;  of  which,  as  one  roc's  the  other  necessarily 
declined.  In  commerce,  he  taught  that  fundamental  and  prevalent  error, 
which  lies  at  the  basis  of  the  restrictive  policy  of  nations,  viz.  That  in  an 
exchange  both  parties  cannot  be  gainers :  consequently,  that  the  gain  of  the 
<^ne  but  counterbalances  the  loss  ol  the  othei- : — hence,  in  his  liction  of  a 
})erfcft  commonwealth,  tlie  capital  was  to  be  seated  inland,  and  commerce 
])rohibited.  Xeuophon,  Aristotle,  Sec.  hold  a  similar  language ;  degrading,  if 
not  utterly  rejecting,  commerce :  and  by  imposing  forced  limitations  upon 
population,  showing  an  utter  ignorance  of  the  productive  powers  of  indus- 
try to  increase,  or  rather  to  create,  tliat  wealth  by  which  it  is  supported. 

Rome,  which  had  grown  great  by  plunder,  naturally  despised  the  slow 
earnings  of  industry ;  and  the  sentunents  of  her  writers,  as  well  as  tlic  polit:y 
of  her  government,  show  the  erroneous  views  tlien  entertained  of  natiomd 
wealth.  They  regarded  it  as  existing  in  a  certain  definite  quantity  in  the 
■world  at  large,  fluctuating,  but  not  progressive,  and  of  it  every  uation  pa~- 
scssed  it=elf  of  a  share  in  proportion  to  its  strengtli  in  war. — J^. 


POLITICAL    ECONOiMV.  15 

lious  phenomena,  Political  Economy  admits  of  as  much  cer-  Ciiusps  cf 
tainty  in  its  conclusions,  as  any  science  not  exclusively  depend-  of  Voift^ai 
ant  on  mere  relation.     A  brief  exposition  of  the  nature  of  the  Economy. 
principles  on  which  it  is  founded,  and  of  the  mode  in  which  its 
investigations  ought  to  be  conducted,  will  evince  the  correctness 
of  this  statement. 

Political  Economy  is  not  a  science  of  speculation,  but  of  fact  Principles  or 
and  experiment.  The  principles  on  which  the  production  and  Mature  or' 
accumulation  of  wealth  and  the  progress  of  civilization  depend,  *j,','\f,^'g,','"tT' 
are  not  the  offspring  of  legislative  enactments.  Man  must  ex-  Conclusions 
ert  himself  to  produce  wealth,  because  he  cannot  exist  without  arciounii.ii; 
it ;  and  the  desire  implanted  in  the  breast  of  every  individual 
of  rising  in  the  world  and  improving  his  condition,  impels  hinx 
to  save  and  accumulate.  The  principles  which  form  the  basis 
of  this  science  make,  therefore,  a  part  of  the  original  constitu- 
tion of  man  and  of  the  physical  world,  and  their  operations,  like 
those  of  the  mechanical  principles,  are  to  be  traced  bj'-  the  aid 
of  observation  and  analysis.  Thvre  is,  however,  a  material 
distinction  between  the  physical  and  the  moral  and  political 
sciences.  The  conclusions  of  the  former  apply  in  every  case, 
while  those  of  the  latter  only  apply  in  the  majority  of  cases. 
The  principles  on  which  the  production  and  accumulation  of 
wealth  depend  are  inherent  in  our  nature,  but  they  do  not  ex- 
ercise precisely  the  same  influence  over  the  conduct  of  every 
individual  ;  and  the  theorist  must  satisfy  himself  with  framing 
his  general  rules  so  as  to  explain  their  operation  in  the  majorit}-^ 
of  instances,  leaving  it  to  the  sagacity  of  the  observer  to  modify 
them  so  as  to  suit  individual  cases.  Thus  it  is  an  admitted  prin- 
ciple in  the  science  of  Morals,  as  well  as  of  Political  Economy, 
that  by  far  the  largest  proportion  of  the  human  race  have  a 
much  clearer  view  of  what  is  conducive  to  their  own  interests, 
than  it  is  possible  for  any  other  man,  or  select  number  of  men, 
to  have  ;  and  consequently  that  it  is  sound  policy  to  allow  every 
individual  to  follow  the  bent  of  his  inclination,  and  to  engage  in 
any  branch  of  industry  he  thinks  proper.  This  is  the  general 
theorem ;  and  it  is  one  which  is  established  on  the  most  com- 
prehensive experience.  It  is  not,  however,  like  the  laws  which 
regulate  the  motions  of  the  planetary  system, — it  will  hold  good 
in  nineteen  out  of  twenty  instances,  but  the  twentieth  may  be  an 
exception.  But  it  is  not  required  of  the  economist,  that  hi? 
theories  should  quadrate  with  the  peculiar  bias  of  the  mind  of 
a  particular  person.  His  conclusions  are  drawn  from  contem- 
plating the  pi'inciples  which  are  found  to  determine  the  condi- 
tion of  mankind,  as  presented  on  the  large  scale  of  nations  and 
empires.  His  business  is  with  man  in  the  aggregate — with 
states,  and  not  with  families — with  the  passions  and  propensities 
which  actuate  the  great  bulk  of  the  human  race,  and  not  with 
those  which  are  occasionally  found  to  influence  the  conduct  of 
a  solitary  individual. 

This  distinction  should  be  kept  constantly  in  view.  Nothing 
is  more  common  than  to  hear  it  objected  to  some  of  the  best 
established  truths  in  political  and  economical  science,  that  they 
are  at  variance  with  certain  facts,  and  that,  therefore,  they 
must  be  rejected.  But  these  objections  very  often  originate  in 
an  entire  misapprehension  of  the  nature  of  the  science.     U 


16  POLITICAL    El  OAOMY. 

Evidence  on  vvould  be  casy  to  produce  a  thousand  instances  oi'  individuai.T 
coi'iclu'ai^n»  who  have  been  enriched  by  monopoHes  and  restrictions,  and 
of  Political  even  by  robbery  and  plunder  ;  though  it  would  certainly  be  a 
are  Founded,  little  too  much  to  conclude  from  thence  that  society  could  be 
enriched  by  such  means  !  This,  however,  is  the  single  consi- 
deration to  which  the  political  economist  has  to  attend  ; — and, 
until  it  can  be  shown  that  monopolies  and  restrictions  are  not 
destructive  of  national  wealth,  and  that  what  is  gained  by  the 
monopolist  is  not  lost  by  the  public,  he  is  justified  in  consider- 
ing them  injurious.  To  arrive  at  a  well-founded  conclusion  in 
economical  science,  it  is  not  enough  to  observe  results  in  parti- 
cular cases,  or  as  they  affect  particular  individuals  ;  we  must 
further  inquire  whether  these  results  are  co7rstant  and  univer- 
sally applicable — whether  the  same  circumstances  which  have 
given  rise  to  them  in  one  instance,  would  in  every  instance,  and 
in  every  state  of  society,  be  productive  of  the  same  or  similar 
results — A  theory  which  is  inconsistent  with  an  uniform  and 
constant  fact,  must  be  erroneous  ;  but  the  observance  of  a  par- 
ticular result  at  variance  with  our  customary  experience,  and 
when  we  may  not  have  had  the  means  of  discriminating  the  cir- 
cumstances attending  it,  ought  not  to  induce  us  hastily  to  modif}- 
or  reject  a  principle  which  accounts  satisfactorily  for  the  greater 
number  of  appearances. 

The  example  of  the  few  arbitrary  princes  who  have  been 
equitable,  humane,  and  generous,  is  not  enough  to  overthrow 
the  principle  which  teaches  that  it  is  the  nature  of  irresponsi- 
ble power  to  debauch  and  vitiate  its  possessors — to  render  them 
haughty,  cruel,  and  suspicious  ;  nor  is  the  example  of  those 
who,  attentive  only  to  present  enjoyment,  and  careless  of  the 
future,  lavish  their  fortunes  in  boisterous  dissipation  or  vain  ex- 
pense, sufficient  to  invalidate  the  general  conclusion,  that  the 
passion  for  accumulation  is  stronger  and  more  powerful  than  the 
passion  for  expense.  Had  this  not  been  the  case,  mankind  could 
never  have  emerged  from  the  condition  of  savages.  The  mul- 
tiplied and  stupendous  improvements  which  have  been  made  in 
different  ages  ami  nations — the  forests  that  have  been  cut  down 
— the  marshes  and  lakes  that  have  been  drained  and  cultivated — 
fhe  harbours,  roads,  and  bridges,  that  have  been  constructed — 
the  cities  and  edifices  that  have  been  raised — are  all  the  fruit 
of  a  saving  of  income,  and  establish,  in  despite  of  a  thousand 
individual  instances  of  prodigality,  the  ascendancy  and  superior 
force  of  the  accumulating  principle. 

It  is  from  the  want  of  attention  to  these  considerations  that 
much  of  the  error  and  misapprehension  with  which  the  science 
of  Political  Economy  has  been,  and  still  is,  infected  has  arisen. 
Almost  all  the  absurd  theories  and.opinions  which  have  succes- 
sively appeared  have  been  supporlec^  by  an  appeal  to  facts.  But 
a  knowledge  of  facts,  without  a  knowlecjge  of  their  mutual  rela- 
tion— without  being  able  to  show  why  the  one  is  a  cause  and  the 
other  an  effect — is,  to  use  the  illustration  of  ]\I.  Say,  really  no 
lietter  than  the  indigested  enjdition  of  an  almanack  maker,  and 
can  afford  no  means  of  judging  of  the  truth  or  falsehood  of  a 
general  principljc.       ,   ,  ,.  • 

But,  although  we  are -not  to  reject  a  received  principle  be* 
f  afmp  Oft'  the  appareutopposition  nt.'  a  few  results,  with  the  pav- 


I'OLITICAL   ECONOM\.  17 

ticular  circumstances  of  which  we  are  unacquainted,  we  can  Evidence  on 
have  no  confidence  in  its  solidity  if  it  be  not  deduced  from  a  cmfciu^lJons 
very  comprehensive  and  careful  induction.      To  arrive  at  a  ^fJ^"^jJ'C!i'' 
true  knowledge  of  the  laws  regulating  the  production,  distribu-  are'roundrd. 
tion,  and  consumption  of  wealth,  the  economist  must  draw  his 
materials  from  a  very  wide  surface  ;  he  should  study  man  in 
every  different  situation— he  should  have  recourse  to  the  his- 
tory of  society,  of  arts,  of  commerce,  and  of  civilization — to 
the  works  of  philosophers  and  travellers — to  every  thing,  in 
short,  that  can  throw  light  on  the  causes  which  accelerate  or 
retard  the  progress  of  civilization.      He  should  observe  the 
changes  which  have  taken  place  in  the  fortunes  and  condition 
of  the  human  race  in  different  regions  and  ages  of  the  world. 
He  should  trace  the  rise,  progress,  and  decHne  of  industry,  and 
he  should  carefully  discriminate  the  effect  of  different  pohtical 
measures,  and  the  various  circumstances  wherein  an  advancing 
and  declining  society  differ  from  each  other.     Such  investiga- 
tions, by  disclosing  the  real  causes  of  national  opulence  and  re- 
finement, and  of  poverty  and  degradation,  furnish  the  econo- 
mist with  the  means  of  giving  a  satisfactory  solution  of  almost^ 
all  the  important  problems  in  the  science  of  wealth,  and  of 
devising  a  scheme  of  public  administration  calculated  to  ensure 
the  continued  advancement  of  the  society  in  the  career  of  im- 
provement. 

It  must  always  be  kept  in  mind  that  it  is  no  part  of  the  busi- 
ness of  the  economist  to  inquire  into  the  means  by  which  indi- 
vidual fortunes  may  have  been  increased  or  diminished,  except 
to  ascertain  their  general  operation  and  effect.''^  The  public 
interests  ought  always  to  form  the  exclusive  objects  of  his  at- 
tention. He  is  not  to  frame  systems,  and  devise  schemes,  for 
increasing  the  wealth  and  enjoyments  of  particular  classes  ;  but 
to  apply  himself  to  discover  the  sources  of  national  -wealth,  and 
universal  prosperitij,  and  the  means  by  which  they  may  be  ren- 
dered most  productive. 

*  Though  public  and  not  private  wealth,  as  our  author  justly  observes, 
be  the  object  of  inquiry,  yet  from  the  analogy  that  subsists  between  them, 
an  elucidation  of  the  principles  of  the  one  must  tlirow  light  upoH  the  other, 
and  men  thereby  become  not  only  sounder  legislators,  but  also  better  mer- 
chants and  men  of  business,  of  whatever  nature  their  employments  maybe. 
A  few  words  may  serve  to  explain  this  connexion.  Individual  wealth  is  ac- 
quired, either  by  the  ordinary  profits  of  regular  busmess,  or  by  the  accidental 
profits  of  speculation, — in  so  far  as  it  arises  from  tlie  former,  it  rests  upon  the 
natural  price  of  commodities ;  so  that  national  and  individual  wealth  become 
the  same,  governed  by  the  same  laws,  and  advancing  with  equal  steps — 
here  then  the  knowledge  of  this  science  must  be  practically  important.  In 
the  profits  of  speculation  the  case  is  different :  national  and  individual  wealth 
here,  are  not  the  same  :  but  neither  are  they,  as  many  suppose,  at  variance, 
— wealth  on  such  occasions,  where  the  exchange  is  internal,  simply  changes 
hands — individuals  gain  or  lose,  but  the  mass  of  national  wealth  continues 
without  alteration.  Still,  here  also,  this  science  may  serve  as  a  guide  to 
the  enterprise  of  the  capitalist.  Though  his  profits  depend  upon  the  fluc- 
tuations of  a  market  price,  yet  these  fluctuations  have  a  law  by  which 
they  are  limited  and  governed  :  that  law  arises  out  of  the  necessary  costs 
of  production,  which  in  the  case  of  each  commodity  forms  the  central  point 
of  variation.  A  knowledge  of  this  governing  principle,  together  with 
tliose  which  regulate  its  demand  and  supply,  must  obviously  afford  some- 
thing like  a  guide,  in  deterrainin?  the  nature  and  extent  of  a  safe  specu- 
'a1ion. — E. 


POLITICAL    ECONOMY. 


Rise  of  the 
tJcience  in 
Modern 
Europe. 


Mercantile 
System. 


When  we  reflect  on  the  variety  and  extent  of  the  previous 
knowledge  requisite  for  the  construction  of  a  sound  theory  of 
PoHtical  Economy,  we  cease  to  feel  any  surprise  at  the  errors 
into  which  economists  have  been  betrayed,  or  at  the  discrepancy 
of  the  opinions  which  are  still  entertained  on  some  important 
points.  Political  Economy  is  of  very  recent  origin.  Though 
various  treatises  of  considerable  merit  had  previously  appeared 
on  some  of  its  separate  parts,  it  was  not  treated  as  a  whole,  or 
in  a  scientific  manner,  until  about  the  middle  of  last  century. 
This  circumstance  is  of  itself  enough  to  account  for  the  number 
of  erroneous  systems  that  have  since  appeared.  Instead  of  de- 
ducing their  general  conclusions  from  a  comparison  of  particu- 
lar facts,  and  a  careful  examination  of  the  phenomena  attending 
the  operation  of  difierent  principles,  and  of  the  same  principles 
in  different  circumstances,  the  first  cultivators  of  almost  every 
branch  of  science  have  begun  by  framing  their  theories  on  a 
very  narrow  and  insecure  basis.  Nor  is  it  really  in  their  power 
to  go  to  work  differently.  Observations  are  scarcely  ever  made 
or  particulars  noted  for  their  own  sakes.  It  is  not  until  they 
begin  to  be  in  request  as  furnishing  the  only  test  by  which  to 
ascertain  the  truth  or  falsehood  of  some  popular  theory,  that 
they  are  made  in  sufficient  numbers,  and  with  sufficient  accu- 
racy. It  is,  in  the  pecuhar  phraseology  of  this  science,  the 
effectual  demand  of  the  theorist  that  regulates  the  production  of 
the  facts  or  raw  materials,  which  he  is  afterward  to  work  into 
a  system.  The  history  of  Political  Economy  strikingly  exem- 
plifies the  truth  of  this  remark.  Being,  as  we  have  already 
observed,  entirely  unknown  to  the  ancients,  and  but  little  at- 
tended to  by  our  ancestors  up  to  a  comparatively  late  period, 
those  circumstances  which  would  have  enabled  us  to  judge  with 
the  greatest  precision  of  the  wealth  and  civilization  of  the  in- 
habitants of  the  most  celebrated  states  of  antiquity,  and  of 
Europe  during  the  middle  ages,  have  either  been  thought  un- 
worthy of  the  notice  of  the  historian,  or  have  been  only  very 
imperfectly  and  carelessly  detailed.  Those,  therefore,  who 
first  began  to  trace  the  general  principles  of  the  science  had 
but  a  comparatively  limited  and  scanty  experience  on  which  to 
build  their  conclusions.  Nor  did  they  even  avail  themselves  of 
the  ^e\v  historical  facts  with  which  they  might  have  easily  be- 
come acquainted,  but  almost  exclusively  confined  their  attention 
to  those  which  happened  to  fall  within  the  sphere  of  their  own 
observation. 

Agreeably  to  what  we  have  now  stated,  we  find  that  th(< 
theories  advanced  by  the  early  economical  writers  were  formed 
on  the  most  contracted  basis,  and  were  only  fitted  to  explain  a 
few  of  the  most  obvioias  and  striking  phenomena.  The  Mer- 
cantile Theory,  for  example,  was  entirely  bottomed  on  the  popu- 
lar and  prevalent  opinions  respecting  money.  The  precious 
metals  having  been  long  used,  both  as  a  standard  whereby  to 
ascertain  the  comparative  value  of  difierent  commodities,  and 
as  the  equivalents  for  which  they  were  most  frequently  exchan- 
ged, acquired  a  fictitious  importance,  not  merely  in  the  estima- 
tion of  the  vulgar,  but  in  that  of  persons  of  the  greatest  dis- 
cernment. The  simple  consideration  that  all  buying  and  selling 
i"  r<»ally  nothing  more  than  the  bartering  of  one  commodity  foV 


I'OLITICAL   ECONOMV.  li) 

another — of  a  certain  quantity  of  corn  or  wool,  for  example,  i^icrcanuio 
for  a  certain  quantity  of  gold  or  silver,  and  vice  versa,  was  en-  ^y^^^"^- 
tirely  overlooked.  The  attention  was  gradually  transferred 
from  the  mo7iey^s  worth  to  the  money  itself;  and  the  wealth  of 
individuals  and  of  states  came  to  be  measured,  not  by  the  abun- 
dance of  their  disposable  products — by  the  quantity  or  value  ol" 
the  commodities  with  which  they  could  afford  to  purchase  the 
precious  metals — but  by  the  quantity  of  these  tnetals  actually  in 
their  possession.  It  is  on  this  flimsy  and  fallacious  hypothesis 
that  the  theories  of  almost  every  writer  on  economical  subjects 
antecedent  to  the  appearance  of  the  works  of  Child,  North,  and 
Locke,  in  England,  and  of  Gournay  and  Quesnay,  in  France,  are 
founded  ;  and,  what  is  of  intinitely  greater  moment,  it  is  on  this 
same  hypothesis  that  the  difi'erent  civilized  countries  have  pro- 
ceeded to  regulate  their  intercourse  with  each  other.  Their 
grand  object  has  not  been  to  facilitate  the  production  of  the  ne- 
cessaries, comforts,  and  luxuries  of  life,  but  to  monopolise  the 
largest  possible  supply  of  gold  and  silver.  And,  as  in  countries 
destitute  of.  mines,  these  could  not  be  obtained  except  in  ex- 
change for  exported  commodities,  various  schemes  were  re- 
sorted to  for  encouraging  exportation,  and  for  preventing  the 
importation  of  almost  all  products  other  than  the  precious  me- 
tals. In  consequence  of  this  opinion,  the  excess  of  the  value 
of  the  exports  over  the  value  of  the  imports  was  long  consi- 
dered as  the  most  infallible  test  of  the  progress  of  a  country  in 
the  career  of  wealth.  This  excess,  it  was  believed,  could  not 
be  balanced  otherwise  than  Vy  an  equivalent  importation  of  gold 
or  silver,  or  of  the  only  real  wealth  which  it  was  then  supposed 
a  country  covdd  possess. 

These  principles  and  conclusions,  though  absolutely  false  and 
erroneous,  afford  a  tolerable  explanation  of  a  few  very  obvious 
phenomena  ;  and,  what  did  more  to  recommend  them,  they  are 
in  perfect  unison  with  the  popular  prejudices  on  the  subject.  It 
was  natural,  therefore,  that  they  should  be  espoused  by  the 
merchants  or  practical  men,  who  were  the  earliest  writers  on 
this  science.  They  did  not  consider  it  necessary  to  subject  the 
principles  they  assumed  to  any  refined  analysis  or  examination. 
But,  reckoning  them  as  sufficiently  established  by  the  common 
consent  and  agreemen't  of  mankind,  they  directed  themselves 
exclusively  to  the  discussion  of  the  practical  measures  calcula- 
ted to  give  them  the  greatest  efficacy. 

"  Although  a  kingdom,"  says  one  of  the  earliest  and  ablest  Balance  of 
writers  in  defence  of  the  mercantile  system,  "maybe  enriched  '^""ade. 
by  gifts  received,  or  by  purchase  taken,  from  some  other  na- 
tions, yet  these  are  things  uncertain,  and  of  small  consideration, 
Avhen  they  happen.  The  ordinary  means,  therefore,  to  increase 
our  wealth  and  treasure,  is  by  foreign  trade,  whei'ein  we  must 
ever  observe  this  rule — to  sell  more  to  strangers  yearly  than  tec 
consume  of  theirs  in  value.  For,  suppose,  that  when  this  king- 
dom is  plentifully  served  with  cloth,  lead,  tin,  iron,  fish,  and 
other  native  commodities,  we  do  yearly  export  the  overplus  to 
foreign  countries  to  the  value  of  L.  2,200,000,  by  v/hich  m"eans 
we  are  enabled,  beyond  the  seas,  to  buy  and  bring  in  foreign 
wares  for  our  use  and  consumption  to  the  value  of  L.  2,000,000  ; 
Ijy  this  order  duly  kept  in  our  trading,  we  may  rest  assured  that 
the  kin2;dom  shall  be  enriched  yearly  L.  200,000,  which  mu?i 


20  POLITICAL    ECOXOiMY. 


-vstem. 


Mercantile  be  brought  to  US  as  SO  much  treasure  ;  because  that  part  of  our 
stock  which  is  not  returned  to  us  in  wares,  must  necessarily  be 
brought  home  in  treasure." — (Mun's  Treasure  by  Foreign  Trade, 
orig.  edit.  p.  11.) 

The  gain  on  our  foreign  commerce  is  here  supposed  to  con- 
sist exclusively  of  the  gold  and  silver  which,  it  is  taken  for 
granted,  must  necessarily  be  brought  home  in  payment  of  the 
excess  of  exported  commodities.  Mr.  Mun  lays  no  stress  what- 
ever on  the  circumstance  of  Ibreign  commerce  enabling  us  to 
obtain  an  infinite  variety  of  useful  and  agreeable  products, 
which  it  would  either  have  been  impossible  for  us  to  produce 
at  all,  or  to  produce  so  cheaply,  at  home.  We  are  desired  to 
consider  all  this  accession  of  wealth — all  the  vast  addition  made 
by  commerce  to  the  motives  which  stimulate,  and  to  the  com- 
forts and  enjoyments  which  reward  the  labour  of  the  industrious, 
as  nothing,  and  to  fix  our  attention  exclusively  on  the  balance  of 
L.  200,000  of  gold  and  silver  !  This  is  much  the  same  as  if 
we  were  desired  to  estimate  the  comfort  and  advantage  derived 
from  a  suit  of  clothes,  by  the  number  and  glare  of  the  metal 
buttons  by  which  they  are  fastened  !  And  yet  the  rule  for  esti- 
mating the  advantageousness  of  foreign  commerce,  which  Mr. 
Mun  has  here  given,  was  long  regarded  by  the  generality  of 
merchants  and  practical  statesmen  as  infallible  ;  and  such  is  the 
inveteracy  of  ancient  prejudices,  that  even  now  we  are  annually 
congratulated  on  the  excess  of  our  exports  over  our  imports  !* 

*  The  reverse  of  this  fact,  viz.  an  apparent  surplus  of  imports  over  ex- 
ports, which  marked  the  commerce  of  these  United  States  while  in  tlie  con- 
dition of  colonies,  afforded  a  problem  of  very  difficult  solution  to  the  main- 
tainers  of  this  theory.  According  to  their  reasoning,  the  colonies  must  an- 
nually be  growing  poorer,  the  custom-house  books  showing  a  regular  ba- 
lance against  them,  but  as  in  truth  they  were  rapidly  increasing  in  wealtli, 
this  striking  inconsistency  of  principles  with  facts,  brought  such  discredit 
on  their  system,  that  from  the  tune  of  Adam  Smith,  no  scientific  writer 
has  ventured  to  press  the  Balance  of  Trade  as  a  conclusive  test  of  pros- 
jierity  or  decline,  although  popular  prejudice  still  continues  so  to  regard  it. 
On  this  subject  the  following  principles  may  be  considered  settled. 

1.  The  exports  and  imports  of  a  nation  must,  on  a  general  account,  ba- 
lance each  other.  The  reasoning  by  which  this  principle  is  arrived  at,  is 
both  simple  and  conclusive.  A  nation  pays  for  its  imports  by  means  of  its 
exports,  and  as  it  imports  nothing  without  being  paid  for,  its  exports  must 
consequently  balance  its  imports : — from  this  it  follows, 

2.  That  an  unfavourable  balance  of  trade  with  one  nation,  is  made  up 
by  a  favourable  balance  with  others ; — the  liquidation  being  effected  by 
bills  of  exchange,  transferring  these  funds  to  the  creditor  country. 

3.  That  the  custom-house  books  do  not  show  this  equal  balance,  because 
Ihe  estimates  of  both  exports  and  imports,  are  taken  in  the  same  country, 
whereas  they  sliould  be  taken  in  the  countries  to  which  they  respcctivelv 
belong — the  value  of  the  produce  of  this  country  on  its  arrival  in  England, 
balancing,  in  the  long  run,  the  value  of  her  manufactures,  purchased  witli 
the  proceeds,  on  their  arrival  here,  supposing  the  profits  of  capital  in  botli 
countries  to  be  equal. 

4.  From  this  it  further  follows,  that  between  two  countries  carrying  on 
on  equal  exchange  with  each  other,  the  custom-house  books  will  always 
sliow  a  surplus  in  each,  of  imports  over  exports,  and  tliat  the  respective 
profits  of  each  will  be  represented  by  the  amount  of  such  surplus. 

The  case  of  the  colonies  is  thus  then  to  be  explained  : — In  their  direct 
intercourse  with  England,  a  large  balance  annually  appears  against  them  in 
the  custom-house  books ;  this  ajjparent  balance  is  first  to  be  reduced  by 
tlieir  ciicuitous  trade,  and  tlie  final  balance  placed  to  their  credit,  and  not 
to  their  charge ;  it  being  both  tlio.  prnof  and  the  measiuT  oi  a  profitaHf> 
•  ommprcft.,— /?. 


POLITICAL    ECONOMY.  21 

But  there  were  other  circumstances,  besides  ilic  erroneous  Mercaniiio 
notions  respecting  the  precious  metals,  which  led  to  the  forma-  ^i"]^ 
tion  of  the  mercantile  system,  and  to  the  enacting  of  regulations  f^"g^^'';[.';,; 
restrictive  of  the  freedom  of  industry.  The  feudal  government 
established  in  the  countries  that  hail  formed  the  western  division 
of  the  Roman  Empire,  degenerated  into  a  system  of  anarchy 
and  lawless  oppression.  The  princes,  who  were  of  themselves 
totally  unable  to  restrain  the  usurpations  of  the  greater  barons, 
or  to  control  their  violence,  endeavoured  to  strengthen  their  in- 
fluence and  consolidate  their  power,  by  attaching  the  inhabit- 
ants of  cities  and  towns  to  their  interests.  For  this  purpose, 
they  granted  them  charters,  enfranchising  the  inhabitants,  abo- 
lishing every  existing  mark  of  servitude,  and  forming  them  into 
corporations,  or  bodies  politic,  to  be  governed  by  a  council  and 
magistrates  of  their  own  selection.  The  order  and  good  govern- 
ment that  was  thus  established  in  the  cities,  and  the  security  of 
property  enjoyed  by  their  inhabitants,  when  the  rest  of  the 
country  was  a  prey  to  rapine  and  disorder,  stimulated  their  in- 
dustry, and  gave  them  a  vast  ascendancy  over  the  cultivators  of 
the  soil.  It  was  from  the  cities  that  the  princes  derived  the 
greater  part  of  their  supplies  of  money  ;  and  it  was  by  their 
assistance  and  co-operation  that  they  were  enabled  to  control 
and  subdue  the  pride  and  independence  of  the  barons.  But  the 
citizens  did  not  render  this  assistance  to  their  sovereigns  merely 
by  way  of  compensation  for  the  original  gift  of  their  charters^ 
They  were  continually  soliciting  and  obtaining  new  privileges. 
And  it  was  not  to  be  expected  that  princes,  so  very  deeply  in- 
debted to  them,  and  by  whom  they  must  have  been  regarded  as 
forming  by  far  the  most  industrious  and  deserving  portion  of 
their  subjects,  should  be  at  all  disinclined  to  gratify  their  wishes. 
To  enable  them  to  obtain  their  provisions  cheap,  and  to  carry  on 
their  industry  to  the  hpst  advantage,  the  exportation  of  corn, 
and  of  the  raw  materials  of  their  manufactures,  was  strictly  pro- 
hibited ;  at  the  same  time  that  heavy  duties  and  absolute  prohi- 
bitions were  interposed  to  prevent  the  importation  of  manufac- 
tured articles  from  abroad,  and  to  secure  the  complete  monopoly 
of  the  home  market  to  the  home  manufacturers.  These,  toge- 
ther with  the  privilege  granted  to  the  citizens  of  corporate 
towns  of  preventing  any  individual  from  exercising  any  branch 
of  business  until  he  had  obtained  leave  from  them ;  and  the  va- 
riety of  subordinate  regulations  intended  to  force  the  importa- 
tion o£  the  raw  materials  required  in  manufactures,  and  the  ex- 
portation of  the  manufactured  goods,  form  the  principal  features 
of  the  system  of  public  economy  adopted,,  with  the  view  of  en- 
couraging manufacturing  industry,  in  evejy  country  in  Europe, 
in  the  fourteenth,  fifteenth,  sixteenth,  and  seventeenth  centuries. 
The  freedom  of  industry  recognised  by  their  ancient  laws  was 
almost  totally  destroyed.  It  would  be  easy  to  mention  a  thou- 
sand instances  of  the  excess  to  which  this  artificial  system  was 
carried  in  England  and  other  countries  ;  but  as  many  of  these 
instances  must  be  familiar  to  our  readers,  we  shall  only  observe, 
as  illustrative  of  its  spirit,  that  by  an  act  passed  in  1678,  for  the 
encouragement  of  the  English  woollen  manufacture,  it  was  order- 
ed that  all  dead  bodies  should  be  wrapped  in  a  woollen  shroud  1 
But  the  exclusion  of  foreign  competition,  and  the  monopoly 

3 


22  .  POLITICAL   ECONOMY. 

iMcrcantiic  of  the  hoDie  market,  did  not  satisfy  the  manufacturers  and  mer- 
K..\stem.  chants.  Having  obtained  all  the  advantage  they  could  from  the 
pubhc,  they  attempted  to  prey  on  each  other.  Such  of  them 
as  possessed  most  influence,  procured  the  privilege  of  carrying 
on  particular  branches  of  industry  to  the  exclusion  of  every 
other  individual.  This  abuse  was  carried  to  a  most  oppressive 
height  in  the  reign  of  Elizabeth,  who  granted  an  infinite  num- 
ber of  new  patents.  At  length,  the  grievance  became  so  in- 
tolerable, as  to  induce  all  classes  to  join  in  petitioning  for  its 
abolition,  which,  after  much  opposition  on  the  part  of  the  Crown, 
by  whom  the  power  of  erecting  monopolies  was  considered  a 
very  valuable  branch  of  the  prerogative,  was  effected  by  an  act 
passed  in  the  21st  of  James  I.  But  this  act  did  not  touch  any 
of  the  fundamental  principles  of  the  mercantile  or  manufactu- 
ring system  ;  and  the  exclusive  privileges  of  all  bodies  corpo- 
vate  were  exempted  from  its  operation. 

In  France  the  interests  of  the  manufacturers  were  warmly 
espoused  by  the  justly  celebrated  M.  Colbert,  minister  of  finan- 
ces during  the  most  splendid  period  of  the  reign  of  Louis  XIV  ; 
and  the  year  1664,  when  the  famous  tariff,  compiled  under  Col- 
bert's direction,  was  first  promulgated,  has  been  sometimes  con- 
sidered, though  improperly,  as  the  real  era  of  the  manufactu- 
ring system. 

These  restrictions  were  zealously  supported  by  the  writers 
in  defence  of  the  mercantile  system,  and  the  balance  of  trade. 
The  facilities  given  to  the  exportation  of  home  manufactured 
goods,  and  the  obstacles  thrown  in  the  way  of  their  importation 
from  abroad,  seemed  to  them  to  be  particularly  well  fitted  for 
making  the  exports  exceed  the  imports,  and  procuring  a  favour- 
able balance.  Instead,  therefore,  of  regarding  these  regulations 
as  the  offspring  of  a  selfish  monopolizing  spirit,  they  looked  on 
fhem  as  having  been  dictated  by  the  soundest  policy.  The  ma- 
nufacturing and  mercantile  systems  were  thus  naturally  blended 
together.  The  acquisition  of  a  favourable  balance  of  payments 
was  the  grand  object  to  be  accomplished  ;  and  heavy  duties  and 
restrictions  on  importations  from  abroad,  and  bounties  and  pre- 
miums on  exportation  from  home,  were  the  means  by  which  this 
object  was  to  be  attained !  It  cannot  excite  our  surprise  that  a 
system  having  so  many  popular  prejudices  in  its  favour,  and 
which  afforded  a  plausible  and  convenient  apology  for  the  ex- 
clusive privileges  enjoyed  by  the  manufacturing  and  commercial 
classes,  should  have  early  attained,  or  that  it  should  still  pre- 
serve, notwithstanding  the  overthrow  of  its  principles,  a  power- 
ful practical  influence.  Melon  and  Forbonnais  in  France, — 
Genovesi  in  Italy, — ij^un.  Sir  Josiah  Child,  Dr.  Davenant,  the 
authors  of  the  British  Merchant,  and  Sir  James  Stuart,  in  Eng- 
land,— are  the  ablest  writers  who  have  espoused,  some  with 
more  and  some  with  fewer  exceptions,  the  leading  principles  of 
'  the  mercantile  system. 

"It  is  no  exaggeration  to  affirm,  that  there  are  very  few  po- 
litical errors  wliich  have  produced  more  mischief  than  the  mer- 
cantile system.  Armed  with  power,  it  has  commanded  and  for- 
bid where  it  should  only  hciVG  protected.  The  regulating  mania 
which  it  has  inspired  has  tormented  industry  in  a  thousand  ways, 
5o  force  it  from  its  natural  channels.    It  has  made  each  particu  • 


POLITICAL    ECONOMY.  23 

iar  nation  regard  the  welfare  of  its  neighbours  as  inconipatible  Mercantile 
with  its  own ;  hence  the  reciprocal  desire  of  injuring  and  im-  '^i^'*"'- 
poverishing  each  other  ;  and  hence  that  spirit  of  commercial 
rivalry  which  has  been  the  immediate  or  remote  cause  of  the 
greater  number  of  modern  wars.  It  is  this  system  which  has 
stimulated  nations  to  employ  force  or  cunning  to  extort  commer- 
cial treaties,  productive  of  no  real  advantage  to  themselves,  from 
the  weakness  or  ignorance  of  others.  It  has  formed  colonies 
that  the  mother  country  might  enjoy  the  monopoly  of  their  trade, 
and  force  them  to  resort  exclusively  to  her  markets.  In  short, 
where  this  system  has  been  productive  of  the  least  injury,  it  has 
retarded  the  progress  of  national  prosperity;  every  where  else 
it  has  deluged  the  earth  with  blood,  and  has  depopulated  and 
ruined  some  of  those  countries  whose  power  and  opulence  it 
was  supposed  it  would  carry  to  the  highest  pitch." — (Storch, 
Traite  rf'  Economic  Politique,  Tom.  I.  p.  122.) 

The  greater  attention  which  began  to  be  paid,  in  the  seven-  ivo^voss  or 
teenth,  and  in  the  earlier  part  of  the  last  century,  to  subjects  con-  ^.?"f;,"' 
nected  with  finance,  commerce,  and  agriculture,  gradually  pre-  En^ianfi. 
pared  the  way  for  the  downfall  of  the  mercantile  system.  The 
Enghsh  writers  preceded  those  of  every  other  country,  in  point- 
ing out  its  defects,  and  in  discovering  the  real  nature  and  func- 
tions of  money,  and  the  true  principles  of  commerce.  The  es- 
tablishment of  a  direct  intercourse  with  India  did  much  to  ac- 
celerate the  progress  of  sound  opinions.  The  precious  metals 
have  always  been  one  of  the  most  advantageous  ai'ticles  of  ex- 
port to  the  East.*  And  when  the  East  India  Company  was  es- 
tablished in  1600,  power  was  given  them  annually  to  export 
foreign  gold  coins  or  bulhon,  of  the  value  of  L.  30,000.  The 
Company  were,  however,  bound  to  import,  within  six  months 
after  the  return  of  every  voyage,  except  the  first,  as  much  goki 
and  silver  as  should  together  be  equal  to  the  value  of  the  silver 
exported  by  them.  But  the  enemies  of  the  Company  contended, 
that  these  regulations  were  not  complied  with,  and  that  it  was 
contrary  to  all  principle,  and  highly  injurious  to  the  public  inte- 
rests, to  permit  the  exportation  of  any  quantity  of  bullion.  The 
merchants  and  others  interested  in  the  India  trade,  among  whom 
we  have  to  reckon  Sir  Dudley  Digges,  whose  defence  of  the 
Company  was  published  in  1615,  Mr.  Mun,  who  published  a 
very  able  pamphlet  in  defence  of  the  Company  in  1621,t  Mr. 

*  Pliny,  when  enumerating  the  spices,  silks,  ami  other  Eastevn  products 
imported  into  Italy,  says,  "  Minimaque  computatione  millies  centena  mil- 
lia  sestertium  annis  omnibus,  India  et  Seres,  peninsulaque  ilia  (Arabia)  im- 
perio  nostro  demunt." — (Hist.  JVat.  Lib.  XII.  cap.  IS.)  "  At  the  lowest 
computation,  India,  China,  and  the  Arabian  Peninsula,  annually  take  out  of 
the  Empire,  an  hundred  million  of  sesterces." — (JVatural  Hist.)  A  sum, 
according  to  the  received  calculations,  of  807,291/.  13s.  4rf.  sterling. — E. 

The  Emperor  Charles  V.  used  to  say  that  the  Portuguese,  who  then  en- 
grossed almost  the  whole  commerce  of  the  East,  were  the  common  ene- 
mies of  Christendom,  inasmuch  as  they  drained  it  of  its  treasure  to  export 
it  to  infidels ! — (Misselden  On  Free  Trade,  p.  24.) 

t  This  pamphlet,  which  is  now  become  extremely  rare,  is  printed  in 
Purchas's  Pilgrims,  Vol.  I.  p.  732.  It  is  entitled,  "  A  Discourse  of  Trade 
from  England  to  the  East  Indies,  answering  to  divers  objections  which  are 
usually  made  against  the  same ;  particularly  as  to  the  exporting  of  gold 
and  silver  for  unnecessary  wares."  Mr.  Misselden's  tract,  which  is  enti- 
tled, "  The  Circle  of  Commerce,  or  the  Balance  of  Trade,"  was  answeied 
the  same  year,  by  Gerard  Malyne,  a  London  merchiint.     Tlie  tract  of  Sir 


24  POLITICAL    ECONOMY. 

Progressof  Misscltlen,  and  more  recently,  Sir  Josiah  Child,  could  not  con- 
PcicnecTi^'  trovcrt  the  reasoning  of  Ihcir  opponents,  without  openly  im- 
Kngian;!.  pugning  ?ome  of  the  commonly  received  opinions  regarding 
money.  In  such  circumstances,  it  is  easy  to  see,  that  prejudice 
would  be  forced  to  give  way  to  interest.  At  first,  however,  the 
advocates  of  the  Company  diti  not  contend,  nor  is  there,  indeed, 
any  good  reason  for  thinking  that  they  were  of  opinion  that  the 
exportation  of  gold  or  silver  to  the  East  Indies  was  beneficial, 
on  the  single  ground  that  the  commodities  brought  back  wt-re  of 
greater  value.  They  contended,  that  the  Company  did  not  ex- 
port a  greater  quantity  of  bullion  than  their  charter  authorized 
them  to  do  ;  and  they  further  contended,  that  this  exportation 
was  advantageous,  because  the  commodities  imported  from  India 
were  chiefly  re-exported  to  other  countries,  from  whence  a 
greater  quantity  of  bullion  was  obtained  in  exchange  for  them.* 
But  even  this  was  an  immense  advance  in  the  progress  to  a 
sounder  theory.  Cest  toujours  le  premier  pas  qui  coute.^  Tho 
advocates  of  the  Company  began  gradually  to  assume  a  higher 
tone  ;  and  at  length  boldly  contended  that  bullion  was  nothing 
hut  a  commodity,  and  that  its  exportation  ought  to  be  rendered 
as  free  as  the  exportation  of  any  other  commodity.  Nor  were 
these  opinions  confined  to  the  partners  of  the  East  India  Com- 
pany. They  were  gradually  communicated  to  others  ;  and 
many  eminent  merchants  were  taught  to  look  with  suspicion  on 
several  of  the  received  maxims,  and  were  in  consequence  led 
to  acquire  more  correct  and  comprehensive  views  regarding 
commercial  intercourse.  The  new  ideas  ultimately  made  their 
Avay  into  the  House  of  Commons  ;  and  in  1663,  the  statutes 
prohibiting  the  exportation  of  foreign  coin  and  bullion  were  re- 
pealed, and  full  liberty  given  to  the  East  India  Company,  and  to 
private  traders,  to  export  the  same  in  unlimited  quantities. | 

In  addition  to  the  controversies  respecting  the  East  India 
trade,  the  discussions  to  which  the  foundation  of  the  colonies  in 
America  and  the  West  Indies,  the  establishment  of  a  compul- 
sory provision  for  the  support  of  the  poor,  and  the  acts  prohi- 
biting the  exportation  of  wool,  and  the  non-importation  of  Irish 
cattle,  &c.  gave  rise,  attracted  an  extraordinary  portion  of  the 
public  attention  to  questions  connected  with  the  domestic  policy 
of  the  country.  In  the  course  of  the  seventeenth  century,  a 
more  than  usual  number  of  tracts  were  published  on  commer- 
cial and  economical  subjects.     And  although  the  doctrines  of 

Dudley  Dig;ges  is  entitled,  "  The  Defence  of  Trade,"  being  a  letter  to  Sir 
T.  Smith,  President  of  the  East  India  Company. — E. 

*  Those  who  have  not  the  original  pamphlets  may  consult  Macpherson'? 
Historic  of  Commerce,  Vol.  II.  pp.  297,  315,  511, — Macpherson's  ,i1ccoiint  of 
the  European  Commerce  with  India,  pp.  94,  104, — and  Mr.  Robert  Grant's 
tikefch  of  the  History  of  the  Company,  p.  44,  where  they  will  find  an  ample 
confirmation  of  what  we  have  staled. 

t  In  the  first  step  lies  all  the  dilficulty. — E. 

if  The  prejudice  against  the  exportation  of  specie,  is  one  of  the  most 
popular  and  deep  rooted  errors  in  relation  to  money.  It  is  one  which  re- 
tains its  hold  upon  the  minds  of  the  people  after  governments  have  aban- 
doned it.  Yet  all  experience  proves  it  to  be  unfounded,  and  tliat  money, 
like  water,  when  left  free  will  find  its  natural  level.  All  restrictions  to 
withhold  it  are  injurious  or  nugatory.  Spain  has  retained  it  to  its  own  im- 
poverishment ;  and  France  has  within  a  few  years  withdrawn  its  former 
prohibitions  without  suffering  any  inconvenience.  For  money,  as  for  every 
other  commodity,  there  is  a  certain  effective  demand,  which  demand  will 
Hlways  be  supplied  where  commerce  is  unshackled, — E, 


POLITICAL    ECONOMY.  25 

the  greater  number  of  the  writers  are  strongly  tinctured  with  Progress  of 
the  prevailing  spirit  of  the  age,  it  cannot  be  denied,  that  several  scienceTn^ 
of  them  have  risen  above  the  prejudices  of  their  contempora-  England. 
ries,  and  have  an  unquestionable  right  to  be  regarded  as  the 
founders  of  the  modern  theory  of  commerce  ;  as  the  earliest 
teachers  of  those  sound  and  liberal  doctrines,  by  which  it  has 
been  shown,  that  the  prosperity  of  states  can  never  be  promo- 
ted by  restrictive   regulations,   or  by  the  depression  of  their 
neighbours — that  the  genuine  spirit  of  commerce  is  inconsistent 
with  the  dark  and  shallow  policy  of  monopoly — and  that  the 
self-interest  of  mankind,  not  less  than  their  duty,  requires  them 
to  live  in  peace,  and  to  cultivate  friend.ship  with  each  other. 

We  have  already  referred  to  Mr.  Mun's  treatise,  entitled  Eng-  Mr.  Tsim-. 
lancfs  Treasure  by  Foreign  Trade.  This  treatise  was  first  pub- 
lished in  1664  ;  but  there  is  good  reason  to  suppose  that  it  had 
been  written  many  years  previously.  Mr.  Mun's  son,  in  the 
dedication  to  Lord  Southampton,  prefixed  by  him  to  the  work, 
says,  that  his  father  "  was,  in  his  time,  famous  among  mer- 
chants," a  mode  of  expression  which  he  would  hardly  have 
used,  had  not  a  considerable  period  elapsed  since  his  father's 
death  :  and  Mr.  Edward  Misselden,  in  his  Circle  of  ComnLerce, 
published  in  1623,  (p.  36,)  refers  to  Mr.  Mun's  tract  on  the 
East  India  trade,  and  speaks  of  its  author  as  being  an  accom- 
plished and  experienced  merchant.  Perhaps,  therefore,  we  shall 
not  be  far  wrong  if  we  assume,  that  this  treatise  was  written  so 
early  as  1635  or  1640.  At  all  events,  it  is  cei'tain,  that  the 
doctrines  which  it  contains  do  not  difi'er  much  from  those  which 
he  had  previously  maintained  in  his  pamphlet  in  defence  of  the 
East  India  Company,  and  some  of  the  expressions  are  literally 
the  same  with  those  in  the  petition  presented  by  that  body  to 
Parliament  in  1628,  which  is  known  to  have  been  written  by 
Mr.  Mun.*  The  extract  we  have  previously  given,  shows  that 
Mr.  Mun's  opinions,  in  so  far  as  regards  the  question  respecting 
the  balance  of  trade,  were  exactly  the  same  with  those  of  his 
contemporaries.  But,  we  believe,  he  was  the  first  who  endea- 
voured to  show,  and  who  has,  in  point  of  fact,  successful!}'' 
shown,  that  a  favourable  balance  could  never  be  produced  by  re- 
strictive regulations : — that  the  exportation  and  importation  of 
bullion,  coin,  and  every  other  commodity,  should  be  freely  per- 
mitted ; — and  that  violent  measures  will  never-  bring  gold  or 
silver  into  a  kmgdom,  or  retain  them  in  it,  (pp.  27,  92,  &,c.  ori- 
ginal edit.)  Mr.  Mun  also  distinctly  lays  it  down,  "  that  those 
who  have  wares  cannot  want  money,"  and  that  "  it  is  not  the 
keeping  of  our  money  in  the  kingdom,  but  the  necessity  and  use 
of  our  wares  in  foreign  countries,  and  our  want  of  other  com- 
modities, that  causeth  the  vent  and  consumption  on  all  sides  which 
causeth  a  quick  and  ample  trade,"  (p.  43. )t  Nor  are  these  de- 
tached and  incidental  passages  thrown  out  at  random.  They 
breathe  the  same  spirit  which  pervades  the  rest  of  Mr.  Mun's 
book,  and  constitute  and  form  a  part  of  his  system.  His  obser- 
vations in  answer  to  Malyne's,  on  some  rather  difficult  questions 
connected  with  exchange,  are  both  accurate  and  ingenious. 

*  This  petition,  and  the  reasons  on  which  it  is  founded,  were  so  well  es- 
teemed, as  to  occasion  its  being  reprinted  in  1641. 

t  These  expressions  are  in  the  petition  of  the  Company,  presented  to 
Parliament  in  1628. 


2fi  POLITICAL    ECONOMY. 

Progress  of  The  first  edition  of  Sir  Josiah  Child's  celebrated  work  on 
sdenceTn*  trade,  {A  JVew  Discourse  of  Trade,  <^-c.)  was  published  in  1668  ; 
England  but  it  was  very  greatly  enlarged  in  the  next  edition,  published 
SirJosiaii  in  16.90.  There  are  many  sound  and  liberal  doctrines  advan- 
Ciijid.  ^gfj  j„  ^\^[^  book.     The  argument  to  show  that  colonies  do  not 

and  cannot  depopulate  the  mother  country  is  as  conclusive  as  if 
it  had  proceeded  from  the  pen  of  Mr.  Malthus  ;  and  the  just 
and  forcible  reasoning  in  defence  of  the  n:!turalization  of  the 
Jews  is  highly  creditable  to  the  liberality  and  good  sense  of  the 
writer,  and  discovers  a  mind  greatly  superior  to  the  prejudices 
of  the  age.  Sir  Josiah  has  also  mauy  good  and  judicious  obser- 
vations on  the  bad  effects  of  the  laws  against  forestalling  and 
regrating ;  on  those  limiting  the  number  of  apprentices  ;  and 
on  corporation  privileges. 

When  treating  of  the  laws  relating  to  the  exportation  of  wool. 
Sir  Josiah  lays  it  down  as  an  axiom,  "  That  they  that  can  give 
the  best  price  for  a  commodity  shall  never  fail  to  have  it  by  one 
means  or  other,  notwithstanding  the  opposition  of  any  laws,  or 
interposition  of  any  power  by  sea  or  land  ;  of  such  force,  subtilty, 
and  violence,  is  the  general  course  of  trade.'''' 

The  radical  defect  of  Sir  Josiah  Child's  Treatise  consists  in 
the  circumstance  of  its  being  chiefly  written  to  illustrate  the  ad- 
vantages, which  he  labours  to  show,  would  result  from  forcibly 
reducing  the  rate  of  interest  io  fotir  per  cent.;  an  error  into  which 
he  had  been  led  by  mistaking  the  low  interest  of  Holland  for  the 
principal  cause  of  her  wealth,  when  this  low  interest  was  in 
truth  the  effect  of  her  comparatively  heavy  taxation. 

It  is,  however,  worthy  of  remark,  that  this  error  was  very 
soon  detected.  In  the  same  year  (1668)  that  Sir  Josiah's  Trea- 
tise first  appeared,  a  tract  was  published,  entitled.  Interest  of 
Money^mistaken,  or  a  Treatise,  proving  that  the  Abatement  of  In- 
terest is  the  Effect  and  not  the  Cause  of  the  Riches  of  a  Nation, 
The  author  of  this  tract  maintains  the  same  opinions  that  were 
afterward  held  by  Locke  and  Montesquieu,  that  the  interest  of 
money  does  not  depend  on  statutory  regulations,  but  that  it  va- 
ries according  to  the  comparative  opulence  of  a  country  ;  or 
rather  according  to  the  comparative  scarcity  and  abundance  of 
money — increasing  when  the  supply  of  money  diminishes,  and 
diminishing  when  it  increases.*  Having  endeavoured  to  esta- 
blish this  principle,  the  author  of  the  tract  successfully  contends 
that  Sir  Josiah  Child  had  totally  mistaken  the  cause  of  the 
wealth  of  the  Dutch,  of  which  he  shows  the  lowness  of  their 
interest  was  merely  a  consequence, 
flir  William  In  1672,  Sir  William  Petty  puldished  his  celebrated  tract, 
htlcal  Ana-  entitled,  the  Political  Anatomy  of  Ireland.  In  this  work,  the 
lomy.  absurdity  of  the  act  passed  in  1664,  prohibiting  the  importation 

of  cattle,  beef,  &c.  from  Ireland  into  Britain,  is  ably  exposed, 
and  the  advantage  of  an  unconstrained  internal  commerce  clearly 

'■"  It  has  been  generally  supposed  that  Mr.  Hume  was  the  first  %vho 
showed  (in  his  Essay  on  Interest')  the  fallacy  of  this  opinion,  and  who 
proved  that  the  rate  of  interest  did  not  depend  on  the  abundance  or  scar- 
city of  money,  but  on  the  abundance  or  scarcity  of  disposable  capital  com- 
pared with  the  demands  of  the  borrowers,  and  the  rate  of  profit.  This, 
however,  is  a  mistake,  the  doctrine  in  question  having  been  fully  demon- 
strated in  a  pamphlet  written  by  Mr.  Massie,  entitled.  Essay  on  ike  Go- 
verning Causes  of  the  JValural  Rale  of  Interest,  published  two  years  before 
Mr.  Hume's  Essay  appeared. 


POLITICAL   ECONOMV.  27 

set  forth.     "  If  it  be  good  for  England,"  says  Sir  William,  "to  Progress  of 
keep  Ireland  a  distinct  kingdom,  why  do  not  the  predominant  sdTil!2e'ia^ 
party  in  Parliament,  suppose  the  western  members,  make  Eng-  England. 
land  beyond  Trent  another  kingdom,  and  take  tolls  and  customs 
upon  the  borders  ?    Or  why  was  there  ever  any  union  between 
England  and  Wales  ?     And  why  may  not  the  entire  kingdom  of 
England  be  further  cantonised  for  the  advantage  of  all  parties  ?" 
(p.  34.  edit.  1719.) 

The  great  defect  in  the  writings  of  Mun,  Misselden,  Child, 
and  others,  did  not  really  consist  so  much  in  their  notions  about 
the  superior  importance  of  the  precious  metals,  or  even  the  ba- 
lance of  trade,  as  in  their  notions  respecting  the  superior  ad- 
vantages derived  from  the  importation  of  durable,  rather  than  of 
rapidly  perishable  commodities,  and  luxuries.  This,  however, 
was  an  extremely  natural  opinion  ;  and  we  cannot  be  surprised 
that  the  earlier  writers  on  commerce  should  not  have  avoided 
falling  into  an  error,  from  which  neither  the  profound  sagacity 
of  Locke,  nor  the  strong  sense  of  Mr.  Harris,  have  been  able 
to  preserve  them.  But  even  so  early  as  1677,  the  fallacy  of 
this  opinion  had  been  perceived.  In  that  year,  there  appeared 
a  small  tract,  entitled,  England's  Great  Happiness ;  or,  a  Dia- 
logue  between  Content  and  Complaint ;  in  which  the  author  con- 
tends, that  the  importation  of  wine,  and  other  consumable  com- 
modities, for  which  there  is  a  demand,  in  exchange  for  money, 
is  advantageous  ;  and,  on  this  ground j^defends  the  French  trade, 
which  was  as  loudly  declaimed  against  by  the  practical  men  of 
that  day  as  it  is  by  those  of  the  present.  We  shall  make  a  short 
extract  from  this  remarkable  tract : — 

"  Complaint. — You  speak  plain  ;  but  what  think  you  of  the. 
French  trade  ?  which  draws  away  our  money  by  wholesale. 
Mr.  Fortrey,!  whom  I  have  heard  you  speak  well  of,  gives  an 
account  that  they  get  L.  1,600,000  a-year  from  us. 

"  Content. — 'Tis  a  great  sum  ;  but,  perhaps,  were  it  put  to  a 
vote  in  a  wise  Council,  whether  for  that  reason  the  trade  should 
be  left  off,  'twould  go  in  the  negative.  For  pa()er,  wine,  linen y 
Castile  soap,  brandy,  olives,  capers,  prunes,  kidskins,  taffaties, 
and  such  like,  we  cannot  be  without  ;  and  for  the  rest,  which 
you  are  pleased  to  style  .j^pes  and  Peacocks  (although  wise  Solo- 
men  ranked  them  with  gold  and  ivory)  they  set  us  all  agog,  and 
have  increased  among  us  many  considerable  trades.  *  *  I  must 
confess,  I  had  rather  they'd  use  our  goods  than  money ;  but  if 

not,    I  WOULD  NOT  LOSE    THE  GETTING    OF  TEN  POUND  BECAUSE  I 

can't  GET  AN  HUNDRED  ;  and  I  don't  question  but  when  the 
French  get  more  foreign  trade,  they'll  give  more  liberty  to  the 
bringing  in  foreign  goods.  I'll  suppose  John-a-Nokes  to  be  a 
butcher,  Dick-a-Styles  to  be  an  exchange  man,  yourself  a  law- 
yer, will  you  buy  no  meat  or  ribbands,  or  your  wife  a  fine  Indian 
gown  or  fan,  because  they  will  not  truck  zvith  you  for  indentures 
which  they  have  need  of?  I  suppose  no  ;  but  if  you  get  money 
enough  of  others,  you  care  not  though  you  give  it  away  in  spe- 
cie for  these  things  ;  I  think  'tis  the  same  case." 

*  Mr.  Fortrey's  pamphlet  has  been  much  referred  to.  It  was  published 
in  1663,  and  reprinted  in  1673.  It  contains  a  very  good  argument  in  favour 
of  inclosures.  The  reference  in  the  text  sufficiently  explains  the  opinions 
(^  the  writei-  in  regard  to  commerce 


28  POLITICAL    ECONOMY. 

Pro^esaof       The  general  spirit  of  this  tract  may  perhaps  be  better  infer- 
Sde'n'ceTn'''  ^etl  from  the  titles  of  some  of  the  dialogues.    Among  othors,  we 
Ehgland.       have,  "  To  export  money  our  great  advantage  ;" — "  The  French 
trade  a  profitable  trade  ;" — "  Variety  of  wares  for  all  markets, 
a  great  advantage  ;" — "  High  living  a  great  improvement  to  the 
arts  ;" — "  Invitation   of  foreigii    arts,   a   great   advantage  ;" — 
^'■Multitudes  of  traders,  a  great  advantage,"  &c.  &c.      But  its 
influence  was  far  too  feeble  to  arrest  the  current  of  popular 
prejudice.     In  the  year  after  its  publication  (1678)  the  impor- 
tation of  French  commodities  was  prohibited  for  three  years. 
This  prohibition  was  made  perpetual  in  the  reign  of  William 
III.   when  tht^  French  trade   whs  declared  a  ?iM^sartce .' — a  prin- 
.  ciple,  if  we  may  so  call  it,  which  has  been  acted  upon  to  this 
very  hour. 

In  1681,  a  pamphlet  was  pubhshed  in  defence  of  the  East 
India  Company,  under  the  signature  of  "  Philopatris,"  but 
evidently  the  production  of  Sir  Josiah  Child.  In  the  introduc- 
tion to  this  pamphlet,  the  following  general  principles  are  laid 
down  : — 

"  That  all  close  monopolies  (Sir  Josiah  contends  that  the  East 
India  Company  does  not  come  under  this  description,)  of  what 
nature  or  kind  soever,  are  destructive  to  trade,  and  consequently 
obstructive  to  the  increase  of  the  value  of  our  lands. 

"  That  silver  or  gold,  coined  or  uncoined,  though  they  are 
used  for  a  measure  of  all  other  things,  are  no  less  a  commodity 
than  wine,  oil,  tobacco,  cloth,  or  stuff's ;  and  may,  in  many  cases, 
be  exported  as  much  to  the  national  advantage  as  any  other  com- 
modity. 

"  That  no  nation  ever  was,  or  will  be,  considerable  in  trade, 
that  prohibits  the  exportation  of  bullion."  (p.  3.) 
Sir  William  In  S'lT  WiWium  Fetty's,  Cluantulumcunque,  published  in  1682, 
Quantuium-  the  subject  of  money  is  treated  with  great  ability,  and  the  idea 
cunque.  of  draining  England  of  her  cash,  by  an  unfavourable  balance, 
successfully  combated.  "  If  some  English  merchants,"  it  is 
said,  "  should  be  so  improvident  as  to  carry  out  money  only, 
then  the  foreign  merchants  would  buy  up  such  English  com- 
modities as  they  wanted  with  money  brought  into  England  from 
their  respective  countries,  or  with  such  commodities  as  England 
likes  better  than  money  ;  for  the  vending  of  English  commodities 
doth  not  depend  on  any  thing  else  but  the  use  and  need  which  fo- 
reigners have  of  them.''''  Sir  W.  denies  that  "a  country  is  the 
poorer  for  having  less  money;''''  and  concludes  by  strongly  con- 
demning the  laws  regulating  the  rate  of  interest  ;  observing, 
that  there  may  as  well  be  laws  to  regulate  the  rate  of  exchange 
and  of  insurance  (See  pp.  3,  6,  8,  original  edition.)* 
Sir  Dudley  But  a  tract,  entitled.  Discourses  on  Trade,  principally  directed 
to  the  Cases  of  Interest,  Coinage,  Clipping,  and  Increase  of  Money, 

*  Thirteen  years  earlier  had  appeared,  "  A  defence  of  Usury  at  6  per 
cent."  by  T.  Manley,  against  the  attack?  of  Sir  T.  Culpepper,  who 
had  charged  it  with  "  many  crimes  and  oppressions  whereof  it  is  al- 
together innocent."  About  the  same  time  appealed  an  interesting  Re- 
port from  a  joint  Committee  of  the  House  of  Conunons  and  the  Common 
Council  of  London,  entitled  "  England's  Interest,  or  the  great  benefit  to 
Trade  by  Banks  or  Olikcs  of  Credit  in  London." — By  this  it  appears,  that 
Offices  of  this  kind  had  been  already  established  in  that  city,  and  may  be 
cpn?idei-ed  as  the  first  attempt  at  Bankiuj. — E. 


-Vorth. 


POLITICAL  ECONOMY.  29 

written  by  Sir  Dudley  North,  and  published  in  1691,  unques- Progress  of 
lionably  contains  a  far  more  able  statement  of  the  true  princi-  sci^^l'in 
pies  of  commerce  than  any  that  had  then  appeared.  England. 

We  regret  that  our  limits  will  not  permit  our  giving  so  full  an 
account  as  we  could  have  wished  of  this  extraordin-.uy  tract. 
The  author  is  a  most  intelligent  and  consistent  advocate  of  the 
great  principles  of  commercial  freedom.  He  is  not,  like  the 
most  eminent  of  his  predecessors,  well  informed  on  one  subject, 
and  erroneous  on  another.  He  is  throughout  sound  and  liberal. 
His  system  is  consentaneous  in  its  parts,  and  complete.  He 
shows,  that  in  commercial  matters,  nations  have  the  same  inte- 
rests as  individuals  ;  and  exposes  the  absurdity  of  supposing, 
that  any  trade  which  is  advantageous  to  the  merchant  can  be  in- 
jurious to  the  public.  His  opinions  respecting  the  imposition  of 
a  seignorage  on  the  coinage  of  money,  and  the  expediency  of 
sumptuary  laws,  then  in  great  favour,  are  equally  enlightened. 

We  subjoin  from  the  preface  to  this  tract  an  abstract  of  th€ 
general  propositions  maintained  in  it : 

"  That  the  whole  world  as  to  trade  is  but  as  oke  na- 
tion OR  PEOPLE,  AND  THEREIN  NATIONS  ARE  AS  PERSONS. 

"  That  the  loss  of  a  trade  with  one  nation  is  not  that  only, 
separately  considered,  but  so  much  of  the  trade  of  the  world 
rescinded  and  lost,  for  all  is  combined  together. 

"  That  there  can  be  no  trade  unprofitable  to  the  pub- 
lic ;  FOR  IF  any  prove  so,  men  leave  it  off  ;  AND  wherever 
the  traders  thrive,  the  public,  of  which  they  are  part, 
thrive  also. 

"  That  to  force  men  to  deal  in  any  prescribed  manner  may 
profit  such  as  happen  to  serve  them  ;  but  the  public  gains  not, 
because  it  is  taking  from  one  subject  to  give  to  another. 

"  That  no  laws  can  set  prices  in  trade,  the  rates  of  which 
must  and  will  make  themselves.  But  when  such  laws  do  hap- 
pen to  lay  any  hold,  it  is  so  much  impediment  to  trade,  and 
therefore  prejudicial. 

"  That  money  is  a  merchandise,  whereof  there  may  be  a  glut, 
as  well  as  a  scarcity,  and  that  even  to  an  inconvenience. 

"  That  a  people  cannot  want  money  to  serve  the  ordi- 
nary DEALING,  AND  MORE  THAN  ENOUGH  THEY  WILL  NOT  HAVE. 

"  That  no  man  will  be  the  richer  for  the  making  much  mo- 
ney, nor  have  any  part  of  it,  but  as  he  buys  it  for  an  equiva- 
lent price. 

"  That  the  free  coynage  is  a  perpettial  motion  found  out,  ivhere- 
hy  to  melt  and  coyn  without  ceasing,  and  so  to  feed  goldsmiths  and 
coyners  at  the  public  charge. 

"  That  debasing  the  coyn  is  defrauding  one  another,  and  to 
the  public  there  is  no  sort  of  advantage  from  it ;  for  that  admits 
no  character,  or  value,  but  intrinsick. 

"  That  the  sinking  by  alloy  or  weight  is  all  one. 

"  That  exchange  and  ready  money  are  the  same,  nothing  but 
carriage  and  re-carriage  being  saved. 

"  That  money  exported  in  trade  is  an  increase  to  the  wealth 
of  the  nation  ;  but  spent  in  war,  and  payments  abroad,  is  so  much 
impoverishment. 

"  In  short,  that  all  favour  to  one  trade,  or  interest,  is 

AN  ABUSE,  and  CUTS  SO  MUCH  OF  PROFIT  FROM  THE  PUPITC." 

4 


30' 


POLITICAL    ECONOMY. 


Progress  of  Unluckily  this  admirable  tract  never  obtained  any  consider-* 
sc^iKeTn"'  ^^'^  circulation.  There  is  good  reason,  indeed,  to  suppose  that 
England.  it  uas  designedly  suppressed.*  At  all  events,  it  speedily  be- 
came excessively  scarce  ;  and  we  are  not  aware  that  it  has  ever 
been  referred  to  by  any  subsequent  writer  on  commerce, 
ifr.  Locke.  The  disordered  state  of  the  coin,  and  the  proceedings  rela- 
tive to  the  great  recoinage  in  the  reign  of  William  III.,  led  to  a 
great  deal  of  discussion  both  in  and  out  of  Parliament,  and  con- 
tributed, in  no  ordinary  degree,  to  diffuse  juster  notions  respect- 
ing money  and  commerce.  It  was  then  that  Mr.  Locke  pub- 
lished his  well  known  tracts  on  Money. t  These  tracts  immedi- 
ately obtained  a  very  extensive  circulation  ;  and  though  infected 
with  some  very  grave  errors,  they  had  a  powerful  influence  in 
preventing  Mr.  Lowndes's  proposal  for  degrading  the  standard 
of  the  coin  from  being  carried  into  effect,  and  in  contributing  to 
establish  the  true  theory  of  money.  The  restoration  of  the 
currency  was  not,  however,  effected  without  great  opposition. 
A  large  minority  in  Parliament  supported  Mr.  Lowndes's  views  ; 
and  they  were  also  supported  by  a  number  of  writers.  Of 
Mr.  Barbon.  these,  Mr.  Nicholas  Barbon  seems  to  have  been  one  of  the 
ablest.  In  his  tract,  entitled,  A  Discourse  concerning  Coining 
the  JVctu  Money  Lighter,  published  in  1696,  he  detected  several 
of  the  errors  into  which  Mr.  Locke  had  fallen  ;  and  he  has  the 
further  merit  of  having  ably  demonstrated  the  fallacy  of  the 
popular  opinions  respecting  the  balance  of  trade  ;  and  of  hav- 
ing shown,  that  no  bullion  could  ever  be  sent  abroad  in  payment 
of  an  unfavourable  balance,  unless  it  was  at  the  time  the  cheap- 
est and  most  profitable  article  of  export. 

The  inferences  deduced  by  Mr.  Barbon  from  his  investiga- 
tions into  the  balance  of  trade  and  foreign  exchange  are  : 

"  That  a  trading  nation  is  made  rich  by  traffic  and  the  indus- 
try of  the  inhabitants — and  that  the  native  stock  of  a  nation  can 
never  be  wasted. 

"  That  no  sort  of  commodities  ought  to  be  totally  prohibited 
—and  that  the  freer  trade  is,  the  better  the  nation  "will  thrive. 

"  That  the  poverty  and  riches  of  a  nation  does  not  depend  on 
a  lesser  or  greater  consumption  of  foreign  trade,  nor  on  the  dif- 
ference of  the  value  of  those  goods  that  are  consumed. 

"  That  the  balance  of  trade  is  a  notion  that  serves  rather  to 
puzzle  all  debates  of  trade,  than  to  discover  any  particular  ad- 
vantages a  nation  may  get  by  regulating  of  trade. 

"  That  the  balance  of  trade  (if  there  be  o/je)  is  not  the  cause  of 
sending  away  the  money  out  of  a  nation :  But  that  proceeds  from 
the  difference  of  the  value  of  bidlion  in  several  countHes,  and  from 
the  profit  that  the  merchant  makes  by  sending  it  away  more  than  by 
bills  of  exchange. 

"  That  there  is  no  occasion  to  send  away  money  or  bullion  to 
pay  bills  of  exchange,  or  balance  accounts. 

"  That  all  sorts  of  goods,  of  the  value  of  the  bill  of  exchange, 
or  the  balance  of  the  account,  will  answer  the  bill,  and  balance 
the  account  as  well  as  money." — (p.  59.) 

*  See  the  Honourable  Roger  North's  Life  of  his  brother,  the  Honour- 
able Sir  Dudley  North,  p.  179. 

t  Considerations  on  the  Lowering  of  Interest  and  raising  the  Vahie  of 
Money,  1691.  Further  Considerations  concerning  Raising  the  Value  of 
Money,  1695. 


POLITICAL   ECONOMY.  31 

It  is  singular,  that  a  writer  possessed  of  such  sound  and  en-  Progress  of 
larged  opinions  respecting  the  principles  of  commercial  inter-  sdTn^rrn' 
course,  and  who  had  shown  that  bullion  differed  in  no  respect  England. 
from  other  commodities,  should  have  maintained,  that  the  value 
of  coined  money  chiefly  depended  on  the  stamp  affixed  to  it  by 
goveryiment.    I'his  gross  and  unaccountable  error  destroyed  the 
effect  of  Mr.  Barbon's  tract ;  and  was,  most  probably,  the  cause 
of  the  oblivion  into  which  it  very  soon  fell,  and  of  its  never  hav- 
ing attracted  that  attention  to  which  it  was  on  other  accounts 
justly  entitled. 

The  commercial  writings  of  Dr.  Davenant,  Inspector-Gene-  ^l^J^^'''' 
ral  of  Imports  and  Exports  in  the  reign  of  Queen  Anne,  were 
published  in  the  interval  between  1695  and  1711.  Though  a 
partizan  of  the  mercantile  system.  Dr.  Davenant  had  emancipa- 
ted himself  from  many  of  the  prejudices  of  its  more  indiscrimi- 
nate and  zealous  supporters.  He  considers  a  watchful  attention 
to  the  balance  of  trade,  and  its  "  right  government,*'  as  of  the 
highest  importance  ;  but  he  does  not  consider  wealth  as  consist- 
ing exclusively  of  gold  or  silver  ;  or  that  prohibitions  and  re- 
strictions should  be  rashly  imposed,  even  on  the  intercourse 
with  those  countries  with  which  the  balance  is  supposed  to  be 
unfavourable.  But  we  are  far  from  thinking,  that  the  commer- 
cial writings  of  Dr.  Davenant  deserve  the  eulogies  that  have 
been  bestowed  on  them  ;  or  that  they  had  any  material  effect  in 
accelerating  the  progress  of  sound  commercial  science.  They 
do  not,  in  fact,  contain  a  single  principle  that  is  not  to  be  found 
in  the  work  of  Sir  Josiah  Child.  Some  of  Dr.  Davenant's  pa- 
ragraphs are  exceedingly  good  ;  but  the  treatises  of  which  they 
form  a  part  are  remarkably  inconclusive,  and  are  for  the  most 
part  founded  on  narrow  and  contracted  principles.  There  is  no 
evidence  to  show  that  Dr.  Davenant  was  at  all  aware  of  the  ef- 
fect of  commerce  in  facilitating  the  production  of  wealth,  by 
enabling  the  inhabitants  of  each  particular  country  to  devote 
themselves,  in  preference,  to  those  employments  for  the  success- 
ful prosecution  of  which  they  have  some  natural  advantage.* 

In  1734,  Jacob  Vanderlint,  who  describes  himself  as  a  trades-  Jacob  Van-- 
man,  published  his  tract,  entitled,  Money  answers  all  Things.  '^^'''"' 
Mr.  Stewart  has  referred  to  this  tract  in  the  Appendix  to  his 
valuable  Life  of  Dr.  Sjuith,  and  has  quoted  some  passages  illus- 
trative of  the  advantages  of  commercial  freedom,  which,  he 
truly  says,  "  will  bear  a  comparison,  both  in  point  of  good 
sense  and  of  liberality,  with  what  was  so  ably  urged  by  Mr. 
Hume  twenty  years  aflerward,  in  his  Essay  on  the  Jealousy  of 
Trade.''  Vanderlint  closes  his  pamphlet  with  an  argument  in 
favour  of  the  substitution  of  a  territorial  tax  in  place  of  every 

*  The  progress  of  enlarged  and  liberal  opinions  with  regard  to  com- 
merce seems  to  have  been  in  no  small  degree  counteracted  by  the  publica- 
tion of  the  British  Merchant.  This  work  was  written  by  some  of  the  first 
merchants  of  their  time,  and  was  chiefly  intendetl  to  expose  the  alleged 
defects  in  the  commercial  treaty  with  France  negotiated  by  Queen  Anne's 
Tory  administration  in  1713.  It  consists  of  a  series  of  papers  published 
weekly,  and  afterward  collected  in  three  volumes.  Public  opinion  being 
very  much  against  the  treaty,  the  British  Merchant  enjoyed  a  large  share 
of  popularity.  Its  authors  appear  to  have  been  thoroughly  imbued  with  all 
the  prejudices  of  the  mercantile  sect ;  and  the  work  is  now  only  deserving^ 
of  notice  as  containing  the  fullest  exposition  of  their  peculiar  dactrines 


32  POLITICAL    ECONOMY. 

Progrc63  of    Other — an  idea  borrowed  from  Locke,  and  subsequently  adopted 

9c~r'  by  the  French  economists. 

England.  In  1744,*  Sir  3Iatthevv  Decker,  an  extensive  merchant,  pub- 

S^r  Matthew  hshed  his  Essaij  on  the  Causes  of  the  Decline  of  Foreign  Trade. 

Diicker.  ^his  cssay  has  been  frequently  referred  to  by  Dr.  Smith,  and  it 
deserved  his  notice.  Sir  Matthew  is  a  most  intelligent  and  de- 
cided enemy  of  all  restrictions,  monopolies,  and  prohibitions  -what- 
ever. To  give  full  freedom  to  industry — he  proposes  that  all 
corporation  privileges  should  be  abohshed  ;  and  that  all  the  ex- 
isting taxes  should  be  repealed,  and  replaced  by  a  single  tax  laid 
on  the  consumers  of  luxuries,  proportionally  to  their  incomes. 
The  following  short  extracts  will  give  an  idea  of  the  spirit  and 
ability  which  pervades  Sir  Matthew's  work  : — 

"  In  the  Memoirs  of  De  Witt,  it  is  said,  '  that  restraint  is  al- 
ways Imrtful  to  trade ;'  the  reason  whereof  is  plain  ;  for  nature 
ftas  given  various  products  to  various  countries,  and  thereby  knit 
mankind  in  an  intercourse  to  supply  each  other''s  wants.  To  at- 
tempt to  sell  our  products,  but  to  buy  little  or  none  from  fo- 
reigners, is  attempting  an  impossibility,  acting  contrary  to  the 
intent  of  nature,  cynically,  and  absurdly  ;  and,  as  ours  is  a 
populous  manufacturing  country,  might  be  prejudicial  to  our 
interests  ;  for,  could  we  raise  all  necessaries  and  vanities  with- 
in ourselves,  this  intercourse  designed  by  nature  would  be  de- 
stroyed ;  and  then,  how  is  our  navy,  our  only  bulwark,  to  be 
maintained?"    (p.  147.) 

"  Trade  cannot,  will  not,  be  forced  ;  let  other  nations  prohi- 
bit, by  what  severity  they  please,  interest  will  prevail ;  they 
Tnay  embarrass  their  own  trade,  but  cannot  hurt  a  nation,  whose 
trade  is  free,  so  much  as  themselves.  Spain  has  prohibited  our 
woollens ;  but  had  a  reduction  of  our  taxes  brought  them  to 
their  natural  value  only,  they  would  be  the  cheapest  in  Europe 
of  their  goodness,  consequently  must  be  more  demanded  by  the 
Spaniards,  be  smuggled  into  their  country  in  spite  of  their  go- 
vernment, and  sold  at  better  prices  ;  their  people  would  be 
dearer  clothed,  with  duties  and  prohibitions,  than  without,  con- 
sequently must  sell  their  oil,  wine,  and  other  commodities, 
dearei" ;  whereby  other  nations,  raising  the  like  growths,  would 
gnio  ground  upon  them,  and  their  balance  of  trade  grow  less 
and  less.  But  should  we,  for  that  reason,  prohibit  their  com- 
modities ?  By  no  means ;  for  the  dearer  they  grow,  no  more 
than  what  are  just  necessary  will  be  used  ;  their  prohibition  does 
their  07Vn  business :  some  may  be  necessary  for  us  ;  what  are  so, 
we  should  not  make  dearer  to  our  own  people ;  some  may  be  pro- 
per to  assort  cargoes  for  other  countries,  and  why  should  we 
prohibit  our  people  that  advantage  ?  Why  hurt  ourselves  to 
HURT  THE  Spaniards  ?  If  we  would  retaliate  eifectually  upon 
them  for  their  ill-intent,  handsome  premiums  given  to  our  plan- 
fations,  to  raise  the  same  growths  as  Spain,  might  enable  them 
to  supply  us  cheaper  than  the  Spaniards  could  do,  and  establish 
a  trade  they  could  never  recover.  Premiums  may  gain  trade, 
hot  prohibitions  will  destroy  jV."    (p.  163.) 

*  We  quote  from  the  edition  of  the  Essay  published  at  Edinl'urgli  in 
1756.  It  appears  from  the  work  itself,  (p.  4.^  th:it  it  had  been  written  . 
3  74l> :  the  first  edition  was  in  4to. 


POLITICAL   ECONOMY,  J3 

Sir  Matthew  applies  the  same  argument  to  expose  the  ab-  Progress  of 
surdity  and  injurious  effect  of  our  restraints  on  the  trade  with  scZTc"uT 
France.  "  I  allow,"  he  says,  "  that  Britain  should  be  always  England. 
vigilant  over  the  designs  of  France,  but  need  not  be  afraid  of 
her  power  ;  her  wise  regulations  in  trade  should  be  the  objects 
we  should  keep  our  eyes  upon,  and  out-do  her  if  possible  ;  or 
else,  as  she  rises,  we  must  sink.  But  it  is  our  comfort,  that  our 
remedy  is  always  in  our  own  hands  ;  nor  can  there  be  any  solid 
reason  for  the  nation's  paying  dearer  to  other  countries  for  goods 
we  could  buy  cheaper  in  France.  Would  any  wise  dealer  in 
London  buy  goods  of  a  Dutch  shopkeeper  for  15d.  or  18d. 
when  he  could  have  the  same  from  a  French  shopkeeper  for 
Is.  ?  Would  he  not  consider,  that,  by  so  doing,  he  would  empty 
his  own  pockets  the  sooner,  and  that,  in  the  end,  he  would 
greatly  injure  his  own  family  by  such  whims  ?  And  shall  this 
nation  commit  an  absurdity  that  stares  every  private  man  in  the 

face  ? The  certain  way  to  be  secure  is  to  be  more  powerful, 

that  is,  to  extend  our  trade  as  far  as  it  is  capable  of;  and  as  re- 
straints have  proved  its  ruin,  to  reject  them,  and  depend  on  free- 
dom for  our  security;  bidding  defiance  to  the  French,  or  an}' 
nation  in  Europe,  that  took  umbrage  at  our  exerting  our  natural 
advantages."    (p.  184.) 

We  do  not  know  that  the  impolicy  of  restrictions  on  the  im- 
portation oi  foreign  corn  has  ever  been  more  ably  and  triumph- 
antly exposed  than  in  the  following  passage  :  "  Every  home 
commodity,  in  a  free  trade,  will  find  its  natural  value  ;  for, 
though  that  fluctuates,  as  of  necessity  it  must,  according  to  the 
plentifulness  or  scarcity  of  seasons,  yet  for  the  home  consump- 
tion, every  home  commodity  must  have  great  advantage  over 
the  foreign,  as  being  upon  the  spot,  and  free  from  freight,  insu- 
rance, commission,  and  charges,  which  on  the  produce  of  lands, 
being  all  bulky  commodities,  must  in  general  be  about  \b  per 
cent.,  and  a  greater  advantage  cannot  be  given  without  preju- 
dice ;  for  15  per  cent,  makes  a  great  difference  in  the  price  of 
necessaries  between  the  nation  seUing  and  the  nation  buying, 
and  is  a  great  difficulty  on  the  latter,  but,  arising  from  the  natu- 
ral course  of  things,  cannot  be  helped  ;  though  it  is  a  sufficicjit 
security  to  the  landholder,  that  foreigners  can  never  import  more 
necessaries  than  are  absolutely  required ;  and,  1  presume,  in  such 
cases,  they  have  more  charity  than  to  starve  the  people  merely 
for  an  imaginary  profit,  which  yet  would  prove  their  ruin  in  the 
end ;  for  it  is  a  fallacy  and  an  absurdity  to  think  to  raise  the  va- 
lue of  lands  by  oppressions  on  the  people  that  cramp  their  trade ; 
for  if  trade  declines,  the  common  people  must  either  come  upon 
the  parish,  or  fly  for  business  to  our  neighbours  :  in  the  first 
case,  they  become  a  heavy  tax  on  the  rich,  and  instead  of  buy- 
ing the  produce  of  their  lands,  must  have  it  given  them  ;  and  in 
the  second  case,  when  the  consumers  are  gone,  what  price  will 
the  produce  of  land  bear  ?"     (p.  56.) 

Of  a  work  so  well  known  as  Mr.  Hume's  Political  Essays,  air.  ilumfe, 
(published  in  1752,)  it  is  almost  superfluous  to  speak.  The 
ability  with  which  he  has  combated  the  prejudice  against  the 
French  trade,  and  exposed  the  absurdity  of  the  dread  of  being 
deprived  of  a  sufficient  supply  of  bullion  ;  the  liberality  and  ex- 
pansion of  his  views  respecting  commerce  in  general ;  and  the 


34  POLITICAL    ECONOMY. 

Progress  of  beauty  of  his  illustrations  Cannot  be  too  highly  praised.  It  did 
pdrn"?eTn*'  "ot,  however,  enter  into  Mr.  Hume's  plan  to  give  a  systematic 
Kngiaud.  view  of  the  effects  of  commerce,  nor  has  he  instituted  any 
Mr.  Hunis.  analysis  of  the  sources  of  wealth.  Mr.  Harris  has  endeavoured 
to  supply  the  latter  deficiency  ;  and  his  Essay  upon  Money  and 
Coins,  published  in  1757,  is,  perhaps  on  the  whole,  the  best 
economical  treatise  that  had  appeared  previously  to  the  publi- 
cation of  the  Wealth  of  JVations.  We  have  already  noticed  Mr. 
Harris's  mistake  of  supposing  that  it  was  more  profitable  to  im- 
port durable  rather  than  rapidly  consumable  commodities  ;  and, 
as  a  writer  on  commerce,  he  is  undoubtedly  very  inferior  to  Sir 
Dudley  North  and  Sir  Matthew  Decker.  But  the  comprehen- 
sive and  able  manner  in  which  he  has  treated  the  subject  of 
money  ;  the  skill  with  which  he  has  illustrated  the  effects  of 
the  division  of  labour  in  facilitating  production  and  increasing 
wealth  ;  and  the  near  approach  he  has  made  to  some  of  the 
fundamental  doctrines  of  Dr.  Smith,  if  they  do  not  give  him  a 
pre-eminence,  certainly  place  him  in  the  first  rank  among  his 
precursors. 
r^uiy  Italian  We  havc  been  induced  to  treat  of  the  progress  of  commer- 
Commerc".  cial  scicuce  in  England  at  considerable  length,  partly  on  account 
of  the  interest  and  importance  of  the  subject,  and  partly  be- 
cause we  are  not  acquainted  with  any  work  in  which  it  has  been 
investigated.  M.  Say  and  some  other  continental  writers  con- 
tend, that  the  Italians  and  French  were  the  first  who  discovered 
and  established  the  just  principles  of  commercial  intercourse. 
But  the  details  we  have  now  given  prove  the  indisputable  pri- 
ority of  the  English.  The  economical  works  of  Davanzati, 
Serra,  Turbolo,  and  Scaruffi,  are  almost  wholly  occupied  with 
a  discussion  of  the  effects  of  a  forced  reduction  of  the  standard 
of  money.  They  deserve  credit  for  having  opposed  all  tam- 
pering with  the  currency  ;  but  the  arguments  they  employ  to 
show  its  injustice  and  impolicy,  are  stated  with  much  greater 
brevity  and  force  in  Sir  Robert  Cotton's  speech  in  the  Privy 
Council  in  1626.  The  Discurso  Economico  of  Bandini,  the  ear- 
liest writer  on  commerce  whose  works  have  been  thought  wor- 
thy of  a  place  in  the  voluminous  collection  of  Italian  works  on 
Political  Economy,*  was  published  so  late  as  1737.  Belloni 
and  Algarotti's  Essays  on  Commerce,  both  very  inferior  to  the 
works  of  Sir  Josiah  Child  or  Sir  Dudley  North,  were  published, 
the  former  in  1750,  and  the  latter  in  1763. 
i;ariy  French  The  French  have  still  less  claim  than  the  Italians  to  be  con- 
«^'Immerce"  ^idcrcd  the  discovcrcrs  of  the  true  principles  of  commerce. 
There  is  much  accurate  observation,  and  many  just,  patriotic, 
and  striking  observations  on  the  injury  France  sustained  from 
the  want  of  a  free  internal  traffic,  and  from  the  oppressiveness 
of  taxation,  in  the  Dixme  Royale  of  the  famous  Marshal  V^auban, 
written  in  1698.  But  Vincent  de  Gournay,  whom  the  French 
state  to  be  one  of  the  earliest  of  their  authors  who  entertained 
comprehensive  and  liberal  notions  regarding  commerce  in  gene- 
ral, was  born  so  late  as  171 2.1     M.  Gournay  published  transla- 

*  Scrittori  Classic i  Italiani  di  Economicc  Politica.  The  publication  of 
this  collection  of  the  works  of  her  economical  writers  does  honour  to  Italy. 
U  was  begun  in  1803  and  finished  in  1805,  in  50  volumes,  8vo. 

+  Rpe  Diipont's  edition  Des  (Ewrcs  de  M.  Tvrgot.  Tom.  III.  p.  HH 


POLITICAL    ECONOMY.  36 

tions  of  the  treatise  of  Sir  Josiah  Child,  and  of  a  tract  of  Sir  Early  French 
Thomas  Culpepper's,  at  Paris,  in  1752.     So  slow  was  the  pro-  cJ^^rZ 
gress  of  economical  science  in  France,  that  even  Montesquieu 
has  a  chapter  entitled,  "  A  quelles  nations  il  est  desavantageux 
de  fair c  le  commerce.''''^ 

But  neither  the  efforts  of  the  English  nor  French  writers  in  System  of 
favour  of  the  freedom  of  commerce  ;ind  industry  had  any  con-  Economrsts. 
siderahle  influence  on  the  mercantile  system.  Their  opinions 
respecting  the  nature  of  wealth,  and  of  the  causes 'of  national 
opulence,  being  confused  and  contradictory,  their  arguments  in 
favour  of  a  liberal  system  of  commerce  had  somewhat  of  an 
empirical  appearance,  and  failed  of  making  that  impression 
which  is  always  made  by  arguments  founded  on  well  established 
principles,  and  shown  to  be  consistent  with  experience.  Mr. 
Locke,  as  we  shall  hereafter  show,  unquestionably  entertained 
very  correct  opinions  respecting  the  paramount  influence  of  la- 
bour in  the  production  of  wealth  ;  but  he  did  not  prosecute  his 
investigations  with  the  view  of  elucidating  the  principles  of  this 
science,  and  made  no  reference  to  them  in  his  subsequent  wri- 
tings. Mr.  Harris  adopted  Mr.  Locke's  views,  and  deduced 
from  them  some  practical  inferences  of  great  importance  ;  but 
his  general  reasonings  are  merely  introductory  to  his  Treatise 
on  Money,  and  are  not  illustrated  with  that  fulness  of  detail,  or 
in  that  comprehensive  and  systematic  mariner  that  is  necessary 
in  scientific  works.  The  celebrated  M.  Q,uesnay,  a  physician,  M.  Ou-^iu.v 
attached  to  the  court  of  Louis  XV.,  has  the  unquestionable 
merit  of  being  the  first  who  attempted  to  investigate  and  ana- 
lyze the  sources  of  wealth,  with  the  intention  of  ascertaining 
the  fundamental  -principles  of  Political  Economy^  and  who  gave 
it  a  systematic  form,  and  raised  it  to  the  rank  of  a  science. 
Quesnay's  father  was  a  small  proprietor,  and  having  been  edu- 
cated in  the  country,  he  was  naturally  inclined  to  regard  agri- 
culture with  more  than  ordinary  partiality.    At  an  early  period 

*  "  With  what  nations  it  is  disadvantageous  to  carry  on  commerce." — E. 
Maupertuis,  in  his  Eloge  of  Montesquieu,  candidly  admits  that  France  is 
indebted  for  the  science  of  commerce,  finance,  and  population,  or  of  Politi- 
cal Economy,  to  England.  The  passage  is  curious :  "  Comrae  le  plan  de 
Montesquieu,"  he  observes,  '•  renfermoit  tout  ce  qui  peut  etre  utile  an 
genre  humain,  il  n'a  pas  oublie  cette  partie  esscntielle  qui  regarde  le  com- 
merce, les  finances,  la  population  :  Science  si  nourclle  parnii  nous,  qu'elle 
n'y  a  encore  point  de  nom. — C est  ches  nos  voisins  qu  elle  est  nie ;  et  elk  y 
demuera  jusque  a  ce  que  M.  Melon  lui  Jit  passer  le  mery  "  As  the  plan  of 
Montesquieu  included  all  subjects  that  could  be  useful  to  man,  he  has  not 
forgotten  that  necessary  one  which  relates  to  commerce;  finance,  and  popu- 
lation : — a  science  so  nev/  among  us  that  it  has  not  yet  acquired  a  distinc- 
tive name.  It  is  with  our  neighbours  that  it  arose,  and  there  continued 
vmtil  M.  Melon  brought  it  across  the  channel"^ — E. 

Melon's  work,  Essui  Politique  sur  le  Commerce,  was  published  in  1734. — 
It  is  entirely  founded  on  the  principles  of  the  mercantile  system.  Mr.  Bin- 
don  translated  it  into  English,  and  published  it,  along  with  some  rather  va- 
luable annotations  and  remarks,  at  Dublin,  in  1739. 

Melon  had  advocated  the  ruinous  policy  of  raising  the  denomination  of 
the  coin.  This  gave  occasion  to  the  publication  of  a  very  acute  work  by 
Dutot,  entitled,  Reflexions  Politiques  sur  les  Finances  et  le  Commerce, 
2  Tomes,  12mo.  1738.  Dutot's  work  was  in  its  turn  very  ably  criticised 
by  Duverney,  in  his  Examen  des  Reflexions  Politiques  sur  le  Finances,  &c. 
2  Tomes,  12mo.  1740.  These  works  contain  a  great  deal  of  very  curious 
and  interesting  information  respecting  the  French  finances.  Duverney"? 
account  of  the  famous  Mississippi  Scheme  is  particularly  gooil. 


36  '  POLITICAL   ECONOMY. 

Systmof  of  his  life  he  had  been  struck  with  its  depressed  state  in  France, 
iEconomrsfs.  ^"d  had  set  himself  to  discover  the  causes  which  had  prevented 
its  making  that  progress  which  the  industry  of  the  inhabitants, 
the  fertility  of  the  soil,  and  the  excellence  of  the  climate, 
seemed  to  insure.  In  the  coarse  of  this  inquiry,  he  speedily 
discovered  that  the  prohibition  of  exporting  corn  to  foreign 
countries,  and  the  preference  given  by  the  regulations  of  Col- 
bert to  the  manufacturing  and  commercial  classes  over  the  agri- 
culturists, had  been  one  of  the  most  powerful  obstacles  to  the 
progress  and  improvement  of  agriculture.  But  Quesnay  did 
not  satisfy  himself  with  exposing  the  injustice  of  this  prefer- 
ence, and  its  pernicious  consequences.  His  zeal  for  the  inte- 
rests of  agriculture  led  him,  not  merely  to  place  it  on  the  same 
level  with  manufactures  and  commerce,  but  to  raise  it  above 
them,  by  endeavouring  to  show  that  it  was  the  only  species  of 
industry  which  contributed  to  increase  the  riches  of  a  nation. 
Founding  on  the  indisputable  fact,  that  every  thing  which  either 
ministers  to  our  wants,  or  gratifies  our  desires,  must  be  origi- 
nally derived  from  the  earth,. Quesnay  assumed  as  a  self-evident 
truth,  that  the  earth  was  the  only  sctirce  of  wealth  ;  and  held 
that  industry  was  altogether  incapable  of  producing  any  new 
value,  except  when  employed  in  agriculture,  including  therein 
fisheries  and  mines.*  His  observation  of  the  striking  effects  of 
the  vegetative  ponders  of  nature,  and  his  inability  to  explain  the 
real  origin  and  causes  of  rent,  confirmed  him  in  this  opinion. 
The  circumstance,  that  of  all  who  are  engaged  in  laborious  un- 
dertakings, none  but  the  cultivators  of  the  soil  paid  rent  for  the 
use  of  natural  agents,  appeared  to  him  an  incontrovertible  proof, 
that  agriculture  was  the  only  species  of  industry  which  yielded 
a  net  surplus  [produit  net)  over  and  above  the  expenses  of  pro- 
duction. Quesnay  allowed  that  manufacturers  and  merchants 
were  highly  useful ;  but,  as  they  realised  no  net  surplus  in  the 
shape  of  rent,  he  contended  they  did  not  add  any  greater  value 
to  the  raw  material  of  the  commodities  they  manufactured  or 
carried  from  place  to  place,  than  what  was  just  equivalent  to 
the  value  of  the  capital  or  stock  consumed  by  them.  These 
principles  once  established,  it  followed  that  landlords,  farmers, 
and  labourers  employed  in  agriculture,  were  the  only  produc- 
tive classes  in  a  state  ;  and  that  the  labour  of  manufacturers 
and  traders  being  unproductive,  their  means  of  subsistence,  and 
their  wealth,  could  only  be  derived  from  the  agriculturists.  It 
further  followed,  that  the  expenses  of  government,  and  the  va- 
rious public  burdens,  however  imposed,  must  be  defrayed  out  of 
ihe.  produit  net,  or  rent  of  the  landlords  :  and,  consistently  with 

'-'"  "  Cherchant  d'ou  vient  les  richesses  des  nations,  Quesnay  trouva 
qu'ellcs  ne  naissent  que  des  travaux  dans  lequels  la  JS'ature  ct  la  Puissance 
Divine,  concourent  avec  les  efforts  pour  produire  ou  faire  recueillir  des 
productions  nouvelles :  de  sorte  qu'on  ne  peut  attendre  Taugmentation  Ac- 
ces  richesses  que  de  la  cultivation,  de  la  peche,  et  de  rexploitation  des 
mines  et  des  carrieres."  (See  the  Kotice  sur  les  JEconomistes,  by  one  of  tlie 
most  zealous  of  the  sect,  Dupont  de  Nemours,  in  the  (Euvrcs  de  Turgot, 
Tome  III.  p.  312.)  "  In  searching  for  the  source  of  national  wealth,  Ques- 
nay found  that  it  arises  from  those  labours  only,  in  which  Nattire  and  the 
power  of  God  concur  with  human  efforts,  in  the  production  or  the  collec- 
tion of  new  products :  so  that  wc  cannot  look  for  an  augmentation  of  gr- 
n<?r»l  wealth,  except  from  agriculture,  fisheries,  and  mining." — E. 


POLITICAL    KCONOMV.  37 

this  principle,  Q,uesnay  proposed  that  all  the  existing  taxes  System  of 
should  be   repealed,   and  that   a  single  tax,   {ITinpot  unique,)  Eronomisu. 
levied  directly  from  the  produce  of  the  land,  should  be  impo- 
sed in  their  stead. 

.  The  economical  table  of  M.  Q,uesnay — "  Cette  formule  etton- 
nante,"  says  Dupont,  "  qui  peint  la  naissance,  la  distribution, 
et  la  reproduction  des  richesses,  et  qui  sert  a  calculer  avec  tant 
de  surety,  de  promptitude,  et  de  precision,  Teffet  de  toutes  les 
operations  relatives  aux  richesses,"* — was  first  published  at 
Versailles  in  1758. 

But  however  much  impi'essed  with  the  importance  of  agri- 
culture over  every  other  species  of  industry,  Quesnay  did  not 
solicit  for  it  any  exclusive  favour  or  protection.  He  success- 
fully contended  th.it  the  interests  of  the  agriculturists,  and  of 
all  the  other  classes,  would  be  best  promoted  by  establishing  a 
system  of  perfect  freedom.  He  showed  that  it  could  never  be 
the  interest  of  the  proprietors  and  cultivators  0"f  tlie  soil  to  fet- 
ter or  discourage  the  industry  of  merchants,  artificers,  and-ma- 
nufacturers  :  for  the  greater  the  liberty  which  they  enjoyed, 
the  greater  would  be  their  competition,  and  their  products 
would,  in  consequence,  be  sold  so  much  the  cheaper.  Neither,, 
on  the  other  hand,  could  it  ever  be  the  interest  of  the  unpro- 
ductive classes  to  harass  and  oppress  the  industry  of  the  agri- 
culturists, either  by  preventing  the  free  exportation  of  their 
products,  or  by  any  restrictive  regulations  whatsoever.  When 
the  cultivators  enjoy  the  greatest  degree  of  freedom,  their  in- 
dustry, and,  consequently,  their  surplus  produce — the  only  fund 
from  which  any  accession  of  national  wealth  can  be  derived, 
will  be  carried  to  the  greatest  possible  extdVt.  According 
to  this  "  liberal  and  generous  system,"  {Wealth  of  Nations, 
Vol,  HI.  p.  17,)  the  establishment  of  perfect  liberty,  perfect 
security,  and  perfect  justice,  is  the  only,  as  it  is  the  infallible, 
means  of  securing  the  highest  degree  of  prosperity  to  all  classes 
of  the  society. 

"  Ou  a  vu,"  says  the  Commentator  of  this  system,  M.  Mer- 
cier  de  la  Riviere,  "  qu'il  est  de  I'essence  de  I'ordre  que  I'in- 
teret  particulier  d'un  seul  ne  puisse  jamais  etre  separ^e  de  I'in- 
teret  commun  de  tous  ;  nous  en  trouvons  une  preuve  bien  con- 
vaincante  dans  les  effets  que  produit  naturellement  et  neces- 
sairement  la  plenitude  de  la  liberte  qui  doit  regner  dans  le  com- 
merce, pour  ne  point  blesser  la  propri^te.  L'interet  personnel 
encouragee  par  cette  grande  liberie,  presse  vivement  et  perpe- 
tuellement  chaque  homme  en  particulier,  de  perfectionner,  de 
multiplier  les  choses  dont  il  est  vendeur  ;  de  grossir  ainsi  la 
masse  des  jouissances  qu'il  peut  procurer  aux  autres  hommes, 
afin  de  grossir,  par  ce  moyen,  la  masse  des  jouissances  que  les 
autres  hommes  peuvent  lui  procurer  en  echange.  Le  monde 
alors  va  de  lui  meme ;  le  desir  de  jouir,  et  la  liberty  de  jouir  ne 
cessant  de  provoquer  la  multiplication  des  productions  et  I'ac' 
croissement  de  I'industrie,  ils  impriment  a  toute  la  socidtt?,  uu 

*  "  That  wonderful  formula  which  depicts  the  origin,  the  distribution, 
and  the  reproduction  of  riches,  and  which  serves  to  calculate  with  so  much 
<"ertainty,  promptitude,  and  precision,  the  effect  of  all  the  op.eratiojis  rela- 
tive to  wealth." — E. 


38  POLITICAL    ECONOMr. 

pvstcin  of     mciuvemeut  qui  devient  une  tendance  perpetuelle  vers  sou  meii- 

Eco^S.  leur  etat  possible."-(Tome  II.  p.  444.)* 

We  shall  have  other  opportunities  of  fully  examining  the  prin- 
ciples of  this  theory.  At  present,  it  is  sufficient  to  remark,  that, 
in  assuming  agriculture  to  be  the  only  source  of  wealth,  because 
the  matter  of  which  all  commodities  are  composed  must  be  ori- 
ginally derived  from  the  earth,  M.  Quesnay  and  his  followers 
mistake  altogether  the  nature  of  production,  and  really  suppose 
wealth  to  consist  of  matter.     But,  in  its  natural  state,  matter  is 

*  "  We  have  seen  that  it  is  of  the  essence  of  the  system,  that  the  inte- 
rjsst  of  an  individual  can  never  be  separated  from  the  common  interest  ot 
all.  Of  this  we  find  a  convincing  proof  in  the  natural,  and  indeed,  neces- 
sary results,  which  flow  from  that  perfect  freedom,  which,  for  the  benefit 
of  property,  ought  to  prevail  in  commerce.  Encouraged  by  this  freedom^ 
personal  interest  is  continually  urging  each  individual  to  perfect  and  mul- 
tiply the  commodities  he  sells  ;  to  swell  in  this  manner  the  mass  of  enjoy- 
ments he  is  able  to  procure  for  others,  in  order  to  augment  by  the  same 
means,  the  mass  of  enjoyments  which  others  can  procure  for  him  in  ex- 
change. Thiis  the  world  regi'lates  itself;  the  desire  of  possessing  and  the 
freedom  of  enjoyment,  as  they  never  cease  to  stimulate  to  the  multiplication 
of  productions  and  the  increase  of  industry,  impress  upon  society  a  general 
movement  and  perpetual  tendency  towards  its  best  possible  estate." — E. 

That  M.  Quesnay  is  entitled  to  the  merit  of  originality  cannot,  we  think, 
be  disputed.  It  is  certain,  however,  that  he  had  been  anticipated  in  seve- 
ral of  his  peculiar  doctrines  by  some  English  writers  of  the  previous  cen- 
tury. The  fundamental  principles  of  the  economical  system  are  distinctly 
and  clearly  stated  in  a  tract  entitled,  Reaso/u  for  a  limi/ed  Exportulion  of 
Wool^  published  in  1677.  "  That  it  is  of  the  greatest  concern  and  interest 
of  the  nation,"  says  the  author  of  the  tract,  "  to  preserve  the  nobility, 
gentry,  and  those  to  whom  the  land  of  the  country  belongs,  at  least,  much 
greater  than  a  few  artificers  employed  in  working  the  stiperfluity  of  our 
wool,  or  the  merchants  who  gain  by  the  exportation  of  our  manufactures, 
is  manifest — 1.  Because  they  are  the  masters  and  proprietaries  of  the  foun- 
dation of  all  the  wealth  in  this  nation,  all  profit  arising  out  of  the  ground 
■tchich  is  theirs.  2.  Because  they  bear  all  taxes  and  public  burdens;  which, 
ih  truth,  are  only  borne  by  those' who  buy,  and  sell  not;  all  sellers,  raising 
the  price  of  their  commodities,  or  abating  their  goodness,  according  to 
their  taxes.'" — (Not  being  able  to  procure  the  pamphlet  itself,  we  quote 
ftom  the  extract  given  in  Mr.  Smith's  Memoirs  of  Wool,  Vol.  I.  p.  254.) 

In  1696.  Mr.  Asgill  published  a  treatise  entitled.  Several  Assertions  Pro- 
red,  in  order  to  Create  Another  Species  of  Money  than  Gold,  in  support  ol' 
Dr.  Chamberlayne's  proposition  for  a  Land  Bank.  We  extract  from  this 
ti-eatise  the  following  passage,  breathing,  as  Mr.  Stewart  has  justly  ob- 
served, the  very  spirit  of  Quesnay's  philosophy : — 

"  What  We  call  commodities  is  nothing  but  land  severed  from  tlie  soil — 
Man  d^als  in  nothing  but  earth.  The  merchants  are  the  factors  of  the 
world,  to  exchange  one  part  of  the  earth  for  another.  The  king  himself 
is  fed  by  the  labour  of  the  ox :  and  the  clothing  of  the  army  and  victual- 
ling of  the  navy  must  all  be  paid  for  to  the  owner  of  the  soil  as  the  ulti- 
mate receiver.  All  things  in  the  world  are  originally  the  produce  of  the 
ground,  and  there  must  all  things  be  raised." — (This  passage  has  been 
quoted  in  Lord  Lauderdale's  Inquiry  into  the  Kature  and  Origin  of  Pub- 
lic Wealth,  2d  ed.  p.  109.) 

These  passages  are  interesting,  as  exhibiting  the  first  germs  of  the  theory 
of  the  Economists.  But  there  is  no  reason  whatever  to  suppose  that  Ques- 
nay was  aware  of  the  existence  of  either  of  the  tracts  referred  to.  The 
subjects  treated  in  them  were  of  too  local  a  description  to  excite  the  atten- 
tion of  foreigners ;  and  Quesnay  was  too  candid  to  conceal  his  obligations 
to  them,  luul  he  really  owed  them  any.  It  is  probable  he  may  have  seen 
Mr.  Locke's  treatise  on  Raising  the  Value  of  Money,  where  the  idea  is 
thrown  out  that  all  taxes  fall  ultimately  on  the  land.  But  there  is  an  ini- 
measurable  difierence  between  the  suggestion  of  Locke  and  the  well  di- 
gested sysiem  lof  Qiu'snay-. 


VOLITICAL    ECONOMV. 


a9 


very  rarely  possessed  of  utility,  and  is  always  destitute  of  va-  S)^»t^;njJ,_ 
lue.     It  isonly  by  means  of  the  labour  bestowed  in  the  appro-  Ec.)iiomi»i.< 
priation  of  matter,  and  in  fitting  and  preparing  it  for  our  use, 
that  it  acquires  exchangeable  value,  and  becomes  wealth.     Hu- 
man industry  does  not  produce  wealth  by  making  any  additions 
to  the  matter  of  our  globe  ;  for  this  is  a  quantity  susceptible 
neither  of  augmentation  nor  diminution.     Its  real  effect  is  sim- 
ply to  produce  wealth  by  giving  utilitij  to  matter  already  in  ex- 
istence ;  and  we  shall  hereafter  show  that  the  labour  employed 
in  manufactures  and  commerce  is  just  as  productive  of  utility, 
and  consequently  of  wealth,  as  the  labour  employed  in  agricul- 
ture.    Neither  is  the  cultivation  of  the  soil,  as  M.  Quesnay  sup- 
posed, the  only  species  of  industry  which  yields  a  surplus  pro^ 
duce  over  the  expenses  of  production.    When  none  but  the  best 
soils  are  cultivated,  and  when,  consequently,  agriculture  is  most 
productive,  no  rent,  or  produit  net,  is  obtained  from  the  land; 
and  it  is  only  after  recourse  has  been  had  to  poorer  soils,  and 
when  the  productive  powers  of  the  labour  and  capital  employed 
in  cuhivation  begin  to  diminish,  that  rent  begins  to  appear.     So 
that,  instead  of  "being  a  consequence  of  the  superior  produc- 
tiveness of  agricultural  industry,  rent  is  really  a  consequence  of 
its  being  less  productive  !     The  opinion  of  M.  Q,uesnay,  thai 
the  labour  of  man  derives  no  assistance  from  the  productive 
powers  of  nature,  except  when  employed  in  agriculture,  is  to- 
tally destitute  of  foundation  ;  and,  in  a  subsequent  part  of  this 
article,  we  shall  show  that  the  manufocturer  and  merchant  de- 
rive fully  as  much  assistance  from  these  powers  as  either  the 
agriculturist,  the  tisher,  or  the  miner. 

Though  the  theory  of  the  French  economists,  considered  in 
reference  to  the  fundamental  principles  of  tlie  science,  was 
equally  erroneous  with  that  to  which  it  was  opposed,  its  no- 
velty and  ingenuity,  its  systematic  and  consentaneous  form,  the 
liberal  system  of  commercial  intercourse  which  it  recommend- 
ed, and  the  benevolent  and  excellent  character  of  its  founder, 
speedily  obtained  for  it  a  very  high  degree  of  reputation.  The 
opinions  of  M.  Quesnay  were  early  communicated  to,  and  zeal- 
ously espoused  by,  his  friends  the  Marquis  de  Mirabeau,  M. 
Mercier  de  la  Riviere,  M.  Dupont  de  Nemours,  and  others  ;  and 
were  afterward  advocated  by  Turgot,  one  of  the  most  distin- 
guished statesmen  of  whom  France  has  to  boast  ;*  and  by  Le- 
Trosne,  Condorcet,  Raynal,  and  most  of  the  succeeding  French 
writers  on  commerce  and  finance.  Their  practical  influence  on 
the  legislation  of  the  country  has  also  been  considerable.  In 
1763  the  free  transportation  of  corn  from  one  province  to  an- 
other was  permitted  ;  and  in  1764  liberty  was  given  to  export 
it  to  foreign  countries  whenever  the  home  price  did  not  exceed 
30  livres  the  septier,  (48s.  the  quarter.)  This  last  edict,  after 
being  suspended  in  1770,  was  again  revived  in  1778  under  the 
administration  of  Turgot.  But  the  facility  given  to  the  imposi- 
tion of  the  contribution  fonciere,]  ought  certainly  to  be  consi- 

*  Turgot's  Reflexions  sur  la  Formatioth  el  la  Dislribution  dcs  RicJiessci^ 
published  in  1771,  is  certainly  the  best  of  all  the  works  founded  on  the 
principles  of  tlie  economists  ;  and  is,  in  some  respects,  the  beat  work  <:m 
Political  Economy  published  previously  to  the  Wealth  of  Kation!>. 

t  The  manorial  or  land  tax. — E. 


40  POLITICAL,    ECONOMY. 

systfim  of     dered  as  the  greatest  practical  achievement  of  the  labours  oi 
i>onomf^'s.  t^6  economists  ;  and  there  is  but  too  much  reason  to  fear  it  will 
long  continue  to  afford  a  palpable  demonstration  of  the  fallacy 
of  their  doctrines."'* 

But  notwithstanding  the  defects  of  their  theory,  there  can  be 
no  question  that  the  labours  of  the  French  economists  contri- 
l)uted  powerfully  to  accelerate  the  progress  of  economical  sci- 
ence. In  reasoning  on  subjects  connected  with  national  wealth, 
it  was  now  found  to  be  necessary  to  subject  its  sources,  and  the 
laws  which  regulate  its  production  and  distribution,  to  a  more 
accurate  and  searching  analysis.  In  the  course  of  this  exami- 
nation, it  was  speedily  ascertained  that  both  the  mercantile  and 
economical  theories  were  erroneous  and  defective  ;  and  that  to 
establish  the  science  of  Political  Economy  on  a  firm  foundation,, 
it  was  necessary  to  take  a  much  more  extensive  surve}^  and. to 
«eek  for  its  principles,  not  in  a  few  partial  and  distorted  facts, 
or  in  metaphysical  abstractions,  but  in  the  connexion  and  rela- 
tion subsisting  among  the  various  phenomena  manifested  in  the 
progress  of  civilization.  The  Count  di  Verri,  whose  Medita- 
tions on  Political  Economy  were  published  in  1771,  demonstra- 
ted the  fallacy  of  the  opinions  entertained  by  the  French  eco- 
nomists respecting  the  superior  productiveness  of  the  labour 
Employed  in  agriculture  ;  and  showed  that  all  the  operations  of 
industry  really  consist  of  modifications  of  matter  already  in  ex- 
istence.]    But  Verri  did  not  trace  the  consequences  of  this  im- 

*  Exclusive  of  the  Reflexions  of  T  argot,  the  following  are  the  principal 
w^orks  published  by  the  French  Economists : — 

Tableau  Economiqrie,  ei  Maximes  Generates  du  Gouvernemenl  Econo- 
laique,  par  Francois  Quesnay,  4to.  Versailles,  1758. 

Theorie  de  Plmpot,  par  M.  de  Mirabeau,  4to.  1760. 

UAmi  des  Hommes,  par  M.  de  Mirabeau,  7  Tomes,  1760,  &c. 

Elements  de  la  Philosophie  Rurale,  par  M.  de  Mirabeau,  3  Tomes. 
12mo.  1763. 

L^Ordre  J^alnrcl  cl  Esscntiel  des  Societes  Politiqnes,  par  Mercier  de  la 
Riviere,  4to.  and  2  Tomes  12mo.  1767. 

Siir  VOrigine  ef  Progres  d''une  Nouvelle  Science,  par  Dupont  de  j\'e- 
mours,  1767. 

La  Physiocratie,  ou  Constitution  JN'aturelle  du  Gouvernemenl  le  ph(i> 
avantageux  aux  genre  humain,  par  Quesnay,  2  Tomes,  1767. 

Letlrcs  rfVn  Citoyen  a  un  Magistral,  sur  les  vingliemes  el  les  autres  im- 
pots,  par  I'Abbe  Baudeau,  1768. 

In  addition  to  these  works  may  be  mentioned,  Mcmoire  sur  les  EJfets  de 
rimpol  Indirect,  a  Prize  Essay  written  for  the  Royal  Agricultural  Society 
of  Limoges,  by  Saint  Perav)',  12mo.  1768  ;  and  the  occasional  articles  sup- 
plied by  Quesnay  and  his  philosophical  fraternity,  for  the  Journal  d'j^gri- 
cMliure,  and  the  Ephcmerides  du  Ciloyen,  a  paper,  sustained  by  them  with 
varied  ability,  from  1767  to  1775,  and  containing  occasionally,  some  origi- 
nal communications  from  Dr.  Franklin,  during  his  residence  in  Pari?.  See 
Franklin's  Works,  Vol.  IV.  p.  206.— i:. 

t  Alcuni  benemeriti  scrittori,  rattristati  dai  gravi  disordini,  che  sofTrono 
i  popoli  per  le  gabellc,  sono  passati  all'estremo  de  considerare  ingiusto  p 
mal  collocate  il  tribute  se  non  ripartito  sui  fondi  di  terra,  e  colla  creazionc 
di  un  linguaggio  ascctico,  hanno  eretta  la  setta  degli  economisti,  presso  la 
quale  ogni  uomo  che  non  adoperi  I'aratro,  e  un  essere  sterile,  e  i  mamifat- 
tori  si  chiamano  una  classe  sterile.  Rispettando  il  molto  di  vero  e  di  utils 
che  da  essi  e  stato  scritto,  io  non  saprei  associarmi  alia  loro  opinione  ne  sul 
tribute,  ne  su  di  questa  pretesa  classe  sterile.  La  riproduzione  e  attribui- 
bile  alia  manifattura  ugualmente,  quanto  al  lavoro  de  campi.  Tutti  i  A- 
nomini  dell'  universo,  sieno  essi  prodotti  dalla  mano  dell'uonio  o  vcro  dalle 
iraiversali  leggi  delta  fisica,  nou  ci  danno  idea  di  attuale  creazionc,  ma  m\\- 
camenfe  di  Una  mcdificapione  della  materia,     .^ccostare  e  srprrare  «^ono  s:li 


POLITICAL    ECONOMY.  41 

portant  principle  ;  and,  possessing  no  clear  and  definite  notions  ^^f'^™  °^j^ 
of  what  constituted  wealth,  did  not  attempt  to  discover  the  B?onomisi'i= 
means  hy  which  labour  might  be  facilitated.  He  made  several 
valuable  additions  to  particular  branches  of  the  science,  and 
had  sufficient  acuteness  to  detect  the  errors  in  the  systems  of 
others  ;  but  the  task  of  constructing  a  better  system  in  their 
stead  required  talents  of  a  far  higher  order. 

At  length  in  1776,  our  illustrious  countryman  Adam  Smith  Wealth  of 
published  the  Wealth  of  JVations — a  work  wliich  has  done  lor 
Political  Economy  what  the  Principia  of  Newton  did  for  Physics, 
and  the  Esprit  des  Loix  of  Montesquieu  for  Politics.  In  this 
work  the  science  was,  for  the  first  time,  treated  in  its  fullest  ex- 
tent, and  many  of  its  fundamental  principles  placed  beyond  the 
reach  of  cavil  and  dispute.  In  opposition  to  the  French  econo- 
mists, Dr.  Smith  showed,  that  labour  is  the  only  source  of 
wealth,  and  that  the  desire  inherent  in  the  breast  of  every  indi- 
vidual to  improve  his  fortune  and  rise  in  the  world  is  the  cause 
of  its  accumulation.  He  next  traced  the  means  by  which  the 
powers  of  labour  may  be  rendered  most  effective,  and  showed 
that  it  is  productive  of  wealth  when  employed  in  manufactures 
and  commerce,  as  well  as  when  employed  in  the  cultivation  of 
the  land.  Having  established  these  principles.  Dr.  Smith  show- 
ed, in  opposition  to  the  commonl}'  received  opinions  of  the  mer- 
chants, politicians,  and  statesmen  of  his  time,  that  wealth  did 
not  consist  in  the  abundance  of  gold  and  silver,  but  in  the  abun- 
dance of  the  various  necessaries,  conveniences,  and  enjoyments 
of  human  life  ;  he  showed  that  individuals  are  always  the  best 
judges  of  what  is  for  their  own  interest,  and  that,  in  prosecuting 
branches  of  industry  advantageous  to  themselves,  they  necessa- 

imici  element!  che  ringegpio  umano  ritrova  analizando  Tidea  della  riprodu- 
zLone ;  e  tanto  e  riproduzione  di  valore  e  di  richezza  se  la  terra,  I'aria,  e 
Vaqua  ne'campi  si  trasmutino  in  grano,  come  se  colla  mano  dello  uomo  il 
glutine  di  un  insetto  si  trasmiiti  in  velluto,  o  vero  alcuni  pezzetti  de  me- 
tallo  si  organizzino  a  formftre  una  ripetizione.  Degli  intieri  citta,  e  degli 
stati  intieri  campano  non  d'altro  che  sul  prodotto  di  questa  fecondissima 
classe  sterile,  la  di  cui  riproduzione  comprende  il  valore  della  materia  pri- 
ma, la  consumazione  proporzionata  delle  mani  impiegatevi,  e  di  piu  quella 
porzione  che  fa  arrichire  chi  ha  intrapresa  la  fabbrica  e  chi  vi  s'impiega 
con  felice  talento. — Medilazioni  sulla  Economia  Politica,  J  3. 

"  Some  deserving  writers,  grieved  by  the  disorders  which  the  people  suf- 
fer by  means  of  taxes,  have  gone  to  the  extreme  of  considering  every  tax 
Tmjust  and  ill-placed,  which  does  not  rest  upon  land ;  and  adopting  an  as- 
cetic language,  have  given  birth  to  the  sect  of  Economists  :  in  whose  judg- 
ment, every  man  who  holds  not  the  plough  is  a  useless  being,  and  manu- 
facturers are  an  improduciivc  class.  In  spite  of  the  truth  and  utility  of 
much  of  what  they  have  written,  I  cannot  unite  with  them  in  opinion, 
either  in  relation  to  taxes  or  to  this  pretended  unproductive  class.  Repro- 
duction is  attributable  equally  to  manufactures  as  to  the  labour  of  the 
fields.  The  phenomena  of  the  universe,  whether  produced  by  the  hand 
of  man  or  by  the  laws  of  nature,  give  us  no  idea  of  actual  creation,  but 
only  of  a  modification  of  matter.  To  unite  and  to  separate,  are  the  only 
elements  we  find  in  the  idea  of  reproduction;  and  the  reproduction  of 
wealth  and  value  is  equal,  whether  it  be  the  earth,  air,  and  water,  in  the 
fields,  iiniting  into  grain,  or  the  hand  of  man  converting  the  gluten  of  an 
insect  into  velvet,  or  bits  of  metal  into  a  watch.  Upon  tlie  labours  of 
this  class  of  men,  falsely  named  unproductive,  whole  cities  and  states  are 
supported ;  since  their  reproduction  contains  within  itself  the  value  of  the 
raw  material,  the  labour  employed  upon  it,  and  the  additional  portion 
which  goes  to  enrich  tlie  undertaker  of  industry,  whoso  skill  i?  devptx'd 
to  it."—/:. 


42-  POLITICAL    ECO.XOjMV. 

Wciitii  of  lily  prosecute  such  as  are  advantageous  to  the  public*  From 
thence  Dr.  Smith  drew  his  grand  inference,  that  every  regula- 
tion intended  to  force  industry  into  particular  channels,  or  to 
determine  the  species  of  commercial  intercourse  to  be  carried 
on  between  different  parts  of  the  same  country,  or  between  dis- 
tant and  independent  countries,  is  impolitic  and  pernicious — 
injurious  to  the  rights  of  individuals — and  adverse  to  the  pro- 
gress of  real  opulence  and  lasting  prosperity. 

The  fact  that  traces  of  most  of  these  principles,  and  even  that 
the  distinct  statement  of  many  of  those  that  are  most  important, 
may  be  found  in  the  works  of  previous  writers,  does  not  in  the 
least  detract  from  the  real  merits  of  Dr.  Smith.  In  adopting  the 
discoveries  of  others,  he  has  made  them  his  own  ;  he  has  de- 
monstrated the  truth  of  principles  on  which  his  predecessors 
had,  in  most  cases,  stumbled  bj'^  chance  ;  has  disentangled  and 
separated  them  from  the  errors  by  which  they  were  incumber- 
ed ;  has  traced  their  remote  consequences,  and  pointed  out  their 
limitations  ;  has  shown  their  practical  importance  and  real 
value — their  mutual  dependance  and  relation  ;  and  has  reduced 
them  into  a  consistent,  harmonious,  and  magnificent  S3fstem. 
We  do  not  mean  to  say  that  Dr.  Smith  has  produced  a  perfect 
work.  Undoubtedly  there  are  errors,  and  those,  too,  of  no  slight 
importance,  in  the  Wealth  of  A'ations.  The  principles  to  which 
we  have  just  referred,  and  which  form  the  basis  of  the  work, 
are  unimpeachable  ;  but  Dr.  Smith  has  not  always  reasoned  cor- 
rectly from  them,  and  he  has  occasionally  introduced  others, 
which  a  more  careful  observation  and  analysis  has  shown  to  be 
ill-founded.  But  after  every  allowance  has  been  made  for  these 
defects,  enough  still  remains  to  justify  us  in  considering  Dr. 
Smith  as  the  real  founder  of  the  science.!    If  he  has  not  left  us 

*  It  is  of  importance  to  observe,  that  Dr.  Smith  does  not  say,  that,  in  pro- 
secuting such  branches  of  industry  as  are  most  advantageous  to  themselves, 
individuals  necessarily  prosecute  such  as  are  at  the  same  time  most  advan- 
tageous to  the  public.  His  leaning  to  the  system  of  the  Economists — a  lean- 
ing perceptible  in  every  part  of  his  work — made  him  so  far  swerve  from  tlie 
principles  of  his  own  system,  as  to  admit,  that  individual  advantage  was  not 
always  a  true  test  of  the  public  advantageousness  of  different  employments. 
He  considered  agriculture,  though  not  the  only  productive  employment, 
the  most  productive  of  any.  He  also  considered  the  home  trade  as  more 
productive  than  a  direct  foreign  trade,  and  the  latter  than  the  carrying 
trade.  We  shall  hereafter  show,  Chat  there  is  no  foundation  for  these  dis- 
tinctions. 

t  For  the  convenience  of  the  student  may  be  here  mentioned  some  of  the 
principal  works  since  the  time  of  A.  Smith,  and  which  partake  more  or  less 
of  the  principles  he  has  so  conclusively  settled.  They  are  chieflj- confined 
to  the  present  century  ;  the  talents  which  adorned  the  close  of  the  last  ha- 
ving been  from  the  political  convulsions  of  Europe,  devoted  to  questions  of 
still  higher  bearing  on  the  interests  of  society,  viz.  on  religion,  morals, 
and  tlie  foundation  of  government. 

In  1783,  Lord  Sheffield  published  his  "  Observations  on  the  Commerce, 
of  the  United  States,"  a  work  ably  reviewed  by  Mr.  Tench  Coxe's  "Brief 
Examination,  &c."  Philadelphia,  1791.  These  works,  however,  are  rather 
statistical  than  scientific. 

Canard,  on  the  prize  question  proposed  by  the  National  Institute  ''  In 
an  agricultural  country  do  taxes  fall  ultimately  on  the  proprietors  of  land  .'" 
Paris,  1800.  This  author  opposes  the  economists — maintains  the  balance 
of  trade — and  adds  a  needless  obscurity  to  his  subject  by  the  u«e  of  the  ann- 
lytiral  formula  of  pure  science. 

DiiTf'?)^.    '"Analvse  Raisonnee.'"     Paris,  1f>00. 


POLITICAL  ex:gnomv.  4J 

a  perlect  work,  he  has,  at  all  events,  left  us  one  which  coniaius  Wuaith  or 
a  greater  mass  of  useful  and  universally  interesting  truths  than  N'^^'""^- 
has  ever  been  given  to  the  world  by  any  other  individual  ;  and 
he  has  pointed  out  and  smoothed  the  route,  by  following  which, 
subsequent  philosophers  have  been  enabled  to  perfect  much 

Lauderdale.  "  Inquiry  into  the  Nature  and  Origin  of  Public  Wealth." 
1804.  This  author  is  marked  lor  maintaining  the  distinction  between  public: 
and  private  wealth — making  the  former  to  consist  in  plenty,  the  latter  tr» 
arise  from  scarcity.  This  inconsistency  is  to  be  avoided  by  drawing  just 
distinctions  between  wealth  and  value. 

Ganihl.  "  Inquiry  into  the  various  Systems  of  Political  Economy,"  a 
work  worth  referring  to  for  its  iacts,  rather  than  its  reasonings  ;  he  appears 
as  the  patron  of  commerce. 

J.  B.  Say.  "  Treatise  on  Political  Economy."  Paris,  1802.  The  first 
edition  of  this  Avork  was  suppressed  by  the  order  of  Bonaparte.  A  later  and 
enlarged  edition  is  familiar  to  the  American  public,  by  the  reprint  of  Prin- 
sep's  Translation  with  notes,  by  C.  C.  Biddle.  Boston,  1821.  For  the  ge- 
neral scholar,  no  work,  after  the  "  Wealth  of  Nations,"  so  well  deserves  to 
be  studied.  To  the  continent  of  Europe  it  may  be  said  to  have  introduced 
the  work  and  principles  of  Smith  ;  and  to  all  it  presented  them  In  a  new  and 
more  scientific  form,  freed  from  those  statistical  details  with  which,  howe- 
ver necessary  at  the  time,  that  great  work  now  appears  to  be  needlessly  load- 
ed. Of  this  treatise  Ricai-do  says, "  it  is  enriched  with  several  acute,  original, 
and  profound  discussions  ;"  and  Mr.  M'C.  in  his  introductory  discourse, 
speaks  of  its  "  clear  and  logical  arrangements,  and  the  felicity  of  many  of 
its  illustrations." 

'■'■Coiiversations  on  Political  Economy,"  by  Madame  Marcet,  London.  This 
little  work,  though  puerile  in  its  form,  and  from  a  female  pen,  is  not  want-< 
ing  in  manly  excellence.  It  has  the  high  merit  of  being  familiar  without 
departing  from  scientific  truth. 

Mallhus''  "Principles  of  Political  Economy."  London,1817.  This  author's 
reputation  was  established  by  his  Essay  on  Population  as  early  as  1798  ;  a 
work  which  lies  at  the  foundation  of  all  subsequent  inquiries  into  that  sub- 
ject. The  principles  so  ably  maintained  in  this  work  may,  however,  be 
Ibund  clearly  and  distinctly  stated  in  Townshend's  "  Dissertation  on  the 
Poor  Laws,"  in  1786,  and  still  earlier,  in  a  tract  of  Dr.  Franklin's  on  Popu- 
lation, written  in  1751.  The  opinions  of  Malthus  in  Political  Economy, 
may  be  said  to  hold  the  medium  between  those  of  Adam  Smith  and  Ricardo. 

Sismondi.  "  New  Principles  of  Political  Economy."  This  author  ap- 
pears as  an  opponent  of  Malthus  on  the  subject  of  population,  of  Ricardo 
in  relation  to  Rent,  and  in  general  of  the  liberal  system  of  Trade  ;  though 
on  other  points,  he  is  both  sound  and  acute. 

Gamier.  The  translator  of  Adam  Smith  into  French,  may  be  ranked 
next  to  Say,  among  his  enlightened  followers  on  the  continent.  Blavct  had 
previously  translated  Smith  in  1801,  but  without  notes. 

Ricardo''s  "  Principles  of  Political  Economy  and  Taxation,"  appeared  in 
1817,  and  may  be  considered  as  constituting  an  era  in  the  science  of  which 
it  treats,  and  the  one  with  which  its  history  closes.  In  the  powers  of  acute 
analysis  he  goes  beyond  all  his  predecessors,  and  has  given  to  the  writin°-s  of 
his  school  a  corresponding  character.  On  the  subject  of  Rent,  and  the  rela- 
tive influence  of  Wages  and  Profits  upon  each  other,  and  on  the  price  of 
commodities,  he  is  universally  acknowledged  to  have  thrown  much  new 
light.  In  the  former  of  these  discoveries,  however,  he  had  been  anticipated 
by  earlier  writers,  by  Malthus  and  more  especially  by  Mr.  West,  a  London 
Barrister,  who  two  years  earlier,  viz.  in  1815,  had  developed  the  true  origin 
of  Rent  in  a  tract,  subscribed  "  A  Fellow  of  University  College,  Oxford." 
A  still  earlier  developement  of  its  nature,  has  recently  been  detected  by  Mr. 
M'C.  in  a  French  work,  entitled  "  Principes  de  tout  Gouvernement,"  pub- 
lished as  early  as  17G6. 

For  the  maintenance  of  the  peculiar  principles  of  Ricardo  in  addition  to 
the  present  article  of  Mr.  M'CuUoch,  the  student  may  refer  to  the  valua- 
ble little  -work  of  Mills,  entitled  "  Elements  of  Political  Economy."  London, 
1821.  For  an  attack  upon  them,  to  an  able  Review  of  the  present  article 
in  the  Quarterly,  No.  60,  of  Aug.  1824,  written  by  a  liberal  adh(?rent  of  (h«^ 
older  school  rif  Adam  Smith.—/'.'' 


44 


POLITICAL    ECOXOMY, 


"Woaltli  of 
>(;ition3. 


that  he  h;ul  left  incomplete,  to  rectify  the  mistakes  into  which 
he  liad  fallen,  and  to  make  many  new  and  important  discoveries. 
Whetlier,  indeed,  we  refer  to  the  soundness  of  its  leading  doc- 
trines, to  the  liberality  and  universal  applicability  of  its  practi- 
cal conclusions,  or  to  the  powerful  and  beneficial  influence  it 
has  had  on  the  progress  and  perfection  of  economical  science, 
and  still  more  on  the  policy  and  destiny  of  nations,  Dr.  Smith's 
work  must  be  placed  in  the  foremost  rank  of  those  that  have 
done  most  to  liberalise,  enlighten,  and  enrich  mankind. 


lOi^oiioimi-iil 
SL-ience  in 
America. 


KCOXOMICAL    SCIENCE    IN    AMERICA. 

In  traeinof  the  history  of  Political  Economy,  some  reference  is  due  to  the 
claims  of  our  own  country  ;  though  it  must  be  acknowledged  we  have  un- 
derstood the  subject  much  better  in  practice  than  in  theory.  Of  scientific 
writers  indeed,  we  have  few  or  none  in  the  early  history  of  the  colonies;  their 
Political  Economy  lay  in  their  Politics.  But  still  in  their  frequent  addresses 
to  the  throne,  petitions  for  the  removal  of  grievances,  defences  of  their  cliar- 
ters,  speeches  in  their  colonial  legislatures,  and  occasional  public  pamphlets 
upon  questions  thus  discussed,  we  find  maintained  by  them  in  firm  and 
•  tear  terms,  the  great  doctrines  which  lie  at  the  foundation  not  only  of  civil 
liberty,  but  of  national  prosperity.  This  is  more  strikingly  true,  as  we 
approach  the  period  of  their  separation  from  the  mother  country,  whei\ 
claims  arbitrarily  pursued  on  the  one  part,  led  to  free  investigation  on  the 
otlier  of  the  foundations  on  which  they  rested,  both  of  policy  and  right. 
This  investigation  terminated,  as  might  be  expected  from  the  spirit  which 
excited  it  in  the  principles  of  free  trade  and  unshackled  industry — princi- 
ples which  were  afterward  embodied  into  the  Constitutions  of  the  various 
States,  as  well  as  into  that  of  the  General  Government,  and  which  in  the 
advancement  of  our  national  prosperity,  have  so  fully  justified  by  their  re- 
sult, the  wisdom  of  those  who  established  them. 

The  reader  desirous  of  referring  to  original  documents  in  support  of 
these  views,  may  consult  among  others, 

"  The  Body  of  Liberties  of  Massachusetts,"  1641. 

"  The  Simple  Cobler  of  Agawam,  1647."  The  work  of  a  clergyman,  one 
Nathan  Ward,  and  so  popular  that  it  ran  through  four  editions  in  two  years. 

"A  defence  of  the  New  England  Charters,"  by  J.  Dummer,  Boston,  1721. 

"  The  Trial  of  Zenger,"  the  editor  of  the  Weekly  Journal,  N.  Y.  1735. 

'•  The  Sentiments  of  a  British  American,"  Thacher,  Boston. 

"  The  Farmer's  Letters,"  DicKinson,  Baltimore. 

'•  Pteport  of  Boston  Committee,"  S.  Adams,  Boston,  1772. 

"  Massachusetts  State  Papers,"  &;c.  fcc. 

Among  the  subjects  of  internal  policy  which  early  excited  the  attention 
of  the  colonies,  was  the  necessity  of  a  paper  currency.  The  channels  of  free 
trade  being  closed  against  them,  the  precious  metals  did  not  flow  into  the 
<>.ountry  in  proportion  to  its  needs,  and  the  colonists  were  left  to  gather  them, 
to  use  the  words  of  Gov.  Pownai  in  his  able  Tract  on  this  subject,  "from  the 
scrambling  profits  of  an  undescribed  traffic."  hi  addition  to  this,  were  the 
peculiar  necessities  of  a  new  and  encreasing  country  which  will  always  be 
found  comparatively  bare  of  metallic  mo«ey,  from  the  great  demands  whicli 
exist  within  it  for  productive  improvements,  and  the  absorption  that  con- 
sequently takes  place  of  coin,  which  as  such  is  a  dead  capital,  into  the  mass 
of  productive  investments. 

From  these  causes,  a  paper  currency  was  universally  adopted,  resting 
necessarily  on  imperfect  funds,  and  the  evils  which  result  from  such  ar- 
rangements, very  generally  experienced.  These  errors  led  to  examination, 
;md  examination  to  a  knowledge  of  principles,  wliich  were  however  more 
generally  advocated  than  acted  upon.  Iji  Pennsylvania  alone  of  all  the 
colonies,  was  this  dangerous  substitute  for  money  established  and  main- 
tained without  depreciation  ;  an  honourable  distinction  gi-eatly  due  to  the 
influence  of  Franklin,  who,  so  early  as  the  year  1729,  wrote  a  Tract  "  On 
tlie  nature  and  necessity  of  a  Paper  Currency."  Its  redemption  rested 
upon  a  landed  security,  the  best  the  situation  of  the  countrv  coidfl  oflci-. 


POLITICAL-  ECONOMY.  45 

and  it  is  a  high  compliment  both  to  the  soundness  of  the  principles  on  which  Economical 
the  loan  offic*  was  established  and  the  integrity  with  which  they  were  ap-  Science  in 
plied,  that  its    paper,  though  not  at  pleasure  redeemable,  maintained  its  ■'^""^f"^*- 
fair  value  for  more  than  fifty  years,  an  evidence  of  skill  which  has  drawn 
forth  the  eulogium  even  of  British  writers. 

At  a  later  period  on  the  same  subject,  we  have  a  short  tract  of  James 
Otis  of  Boston,  though  rather  in  a  political  than  scientific  tone,  opposing  a 
proposal  of  Gov.  Hutchinson's  to  make  gold  a  legal  tender  at  a  diminished 
value. 

As  the  acutest,  however,  of  the  writers  on  colonial  currency,  may  be 
mentioned,  Mr.  Tench  Francis  of  Philadelphia,  an  intelligent  merchant 
and  eminent  lawyer,  whose  tract  on  paper  money,  was  printed  after  his 
death  by  Gov.  Pownal.and  bound  up  in  his  "Administration  of  the  Colo- 
nies." The  date  of  publication  is  1765,  though  written,  as  Gov.  P.  states, 
several  years  before.  The  sagacious  views  of  this  writer  in  relation  to 
prices,  go  beyond  those  of  his  contemporaries  on  either  side  of  the  Atlan- 
tic, and  the  scientific  precision  of  many  of  his  deflhitions,  reminds  us  of  the 
school  of  Ricardo.  . 

"All  value"  says  he,  "is  given  to  things  for  their  fitness  or  pcgror  to 
answer  or  procure  the  necessary  conveniencies  or  pleasures  of  human  life. 
This  value  may  be  considered  absolute  or  relative.  Absolute  value  termi- 
nates in  our  esteem  of  any  thing  without  referring  to  any  other  ;  relative', 
is  that  which  it  has  compared  with  another.  The  latter  only,  (exchange- 
able value,)  I  shall  have  occasion  to  treat  of." 

"  From  the  natural  state  and  order  of  things,  I  think  it  may  be  affirmed 
that  the  worth  or  price  of  any  thing,  will  always  be  as  the  quantity  and 
uses  among  mankind  ;  as  the  uses  directly,  and  as  the  quantity  reciprocally 
or  inversely.  Use  is  the  sole  cause  of  value,  and  value  the  necessary  effect 
of  use.  Price  depends  on  quantity,  and  they  are  to  each  other  inversely,  or  the 
more  the  one,  the  less  the  other.  Water  is  as  necessary  as  any  thing,  and  a 
diamond  perhaps  as  little,  yet  the  superfluous  plenty  of  one  has  rendered  it 
of  no  worth  in  most  places,  and  the  scarcity  of  the  other  has  carried  it  to 
an  extravagant  price."  The  effect  of  a  superfluous  paper  money  he  thus 
states  :  "  If  a  nation  has  a  quantity  of  money  equal  to  its  commerce,  the 
lands,  commodities,  and  labour  of  the  people  shall  bear  a  middle  price. 
This  state  is  the  best,  and  tends  most  to  enrich  the  people  and  make  their 
happiness  lasting.  If  they  should  mint  paper  to  pass  for  money,  the  in- 
crease of  quantity  in  the  former  will  lessen  the  value  of  the  latter,  will 
raise  the  price  of  lands  and  rents,  and  make  the  labour  of  such  a  people 
and  the  commodities,  be  rated  higher  than  in  other  places.  Men's  for- 
tunes will  rise  in  nominal,  not  real  value,  from  whence  idleness,  expense, 
and  poverty  shall  follow.  Where  it  is  found  necessary  to  add  paper  money 
to  the  coin  of  any  country,  to  support  its  value  ought  to  be  the  main  and 
principal  view.  The  paper  derives  its  intrinsic  worth  from  the  fund  wliicli 
is  stable  and  fixed.  If  we  in  Pennsylvania,  upon  a  sufficient  fund  answera- 
ble in  silver  at  a  future  period,  mint  a  quantity  of  paper  equal  to  the  uses 
of  the  people  for  money,  why  should  it  not  at  all  times  have  value  equal  to 
the  nominal  value,  or  to  the  sum  chargeable  on  the  fund  at  the  day  to 
come :" 

From  this  "  very  judicious  and  able  tract"  as  it  is  styled  by  Gov.  Pownal, 
and  one  which  contained,  as  he  acknowledged,  "  the  most  exact  and  deci- 
sive sentiments  on  this  subject,  he  had  any  where  met  with," — the  Editor 
has  thus  largely  quoted  both  from  its  intrinsic  merit  and  from  the  circum- 
stance of  its  being  locked  up  in  a  work  comparatively  but  little  known, 
and  not  very  easy  of  access. 

The  writings  of  Franklin  on  these  subjects,  are  of  a  higher  character. 
They  partake  less  of  the  warmth  of  politics,  and  more  of  the  dignity  of 
science.  The  most  of  them  were  written  and  made  public  many  years 
previous  to  the  Revolutionary  war,  and  consequently  before  the  ap- 
pearance of  that  great  work  of  Adam  Smith  which,  by  a  notable  co- 
incidence, taught  to  England  the  theory  of  national  wealth,  at  the  very 
moment  almost,  in  which  the  colonies  were  entering  on  its  practical  de- 
velopement,  being  published  in  the  beginning  of  1776,  the  year  of  Uie  de- 
claration of  our  independence. 

The  acuteness  of  the  mind  of  Franklin,  however,  was  rather  practical 
than  theoretical — a  kind  of  worldly  tact  that  carried  its  owner  right  with- 
out much  reference  to  principle.     Though  his  short  and  scattered  pieces 


40 


I'OLITICAL    ECONOMY. 


Kconomical  0"  Political  Economy,  therefore,  cannot  enter  into  any  competition  witli 
Science  in  the  "Wealth  of  Nations,"  they  are  yet  deserving  of  notice  in  the  history  of 
America.  ^j^^,  science,  from  the  sound  and  sagacious  views  they  entertain  of  the  true 
principles  of  internal  national  policy,  from  their  preceding  by  several 
years  the  appearance  of  that  work,  which  first  made  these  principles  fa- 
miliar, and  from  the  fact  but  little  known,  of  Adam  Smith's  communica- 
tions with  him,  while  preparing  his  celebrated  "  Inquiry,"  consulting  him 
upon  parts  of  the  work  as  it  proceeded,  and  frequently  deferring  to  his 
opinion. 

The  tone  of  Franklin's  philosophy  on  these  subjects,  may  be  judged 
«f  by  the  following  extracts. 

In  a  note  endorsed  on  a  letter  of  Gov.  Pownal's  without  date,  but  pre- 
vious to  1760,  the  year  of  his  removal,"  Franklin  says,  "  This  objec- 
tion goes  upon  the  supposition,  that  whatever  the  colonies  gain,  Bri- 
tain must  lose,  and  that  if  the  colonies  can  be  kept  from  gaining  an  ad- 
vantage, Britain  will  gain  it.  If  the  colonies  are  fitter  for  a  particular 
trade  than  Britain  is,  they  should  have  it,  and  Britain  apply  to  what  it  is 
more  fit  for  ;  for  other  countries  will  get  it  if  the  colonies  do  not.  Advan- 
tagedhs  circumstances  and  situations  will  always  secure  and  fix  manufac- 
tures ;*Sheffiield  against  Europe  for  three  hundred  years  past." 

His  examination  before  the  British  House  of  Commons  in  1760,  abounds 
with  strong  and  just  views  of  the  true  policy  of  Trade,  and  produced  for  a 
time,  a  sensible  effect  on  the  measures  of  the  administration. 

The  Essay  on  the  principles  of  trade,  which  was  the  joint  production  of 
Dr.  Franklin  and  Mr.  G.  Whately,  deserves  to  rank  in  the  history  of  Po- 
litical Economy  with  the  Essays  of  Hume,  which  were  published  about 
the  same  period. 

"  In  transactions  of  trade,  it  is  not  to  be  supposed  that  like  gaming  what 
one  party  gains,  the  other  must  necessarily  lose — an  exchange  is  gain  to 
each — hereby  the  common  stock  of  comforts  is  increased.''  "■  Freedom 
and  protection  are  most  indisputable  principles,  whereon  the  success  of 
trade  must  depend,  as  clearly  as  an  open  good  road  tends  towards  a  safe 
and  speedy  intercourse  :  nor  is  there  a  greater  enemy  to  trade  than  con- 
straint." "  No  laws  which  the  art  of  man  can  devise,  will  or  can  hinder  or 
entirely  stop  the  current  of  a  profitable  trade,  any  more  than  the  severest 
laws  could  prevent  the  satisfying  of  hunger  when  any  opportiuiity  offered 
to  gratify  it.''  ■'  The  precious  metals,  gold  and  silver,  are  no  other  than 
merchandise  acquired  from  countries  where  there  are  mines,  by  those 
countries  whieh  have  none,  in  exchange  for  the  produce  of  their  land  or 
manufactures. " 

Speaking  of  the  Spanish  laws  for  retaining  coin  at  home  he  says,  "  We 
see  the  folly  of  these  edicts,  but  are  not  our  own  prohibitory  and  restric- 
tive laws,  that  are  professedly  made  with  intention  to  bring  a  balance  from 
«ur  trade  with  foreign  nations,  to  be  paid  in  money — are  not  such  laws 
akin  to  these  Spanish  edicts — follies  of  the  same  family  .'"  "  Most  of.  the 
statutes  of  Parliaments,  Princes,  and  States,  for  regulating,  directing,  or 
restraining  of  trade,  have,  we  think,  been  either  xjolitical  blunders  or  jobs 
obtained  by  artful  men  for  private  advantage,  under  pretence  of  public 
good."  "  It  were  therefore  to  be  wished  that  commerce  was  as  free  be- 
tween all  the  nations  of  the  world,  as  it  is  between  the  several  counties 
of  England  ;  so  would  all  by  mutual  communication  obtain  more  enjoy- 
ment. These  counties  do  not  ruin  tlicmselves  by  trade,  neitlier  would 
the  nations.  No  nation  was  ever  ruined  by  trade,  even  seemingly  the  most 
disadvantageous."  "  As  every  individual  makes  a  part  of  the  whole 
public — whatever  benefits  the  individual  must  benefit  the  public.'" 

On  the  subject  of  the  corn  laws,  his  language  anticipates  tliat  of  A.  Smith. 
"  Those  who  fear  that  exportation  may  so  far  drain  the  country  of  corn  as 
to  starve  ourselves,  fear  what  never  did,  nor  ever  can  happen.  They 
may  as  well  when  they  view  the  tide  ebbing  towards  the  sea,  fear  that  all 
the  water  will  leave  Uie  river.  The  price  of  corn  like  water,  will  find  its 
level.  The  more  we  export,  the  dearer  it  becomes  at  home.  The  more 
is  received  abroad,  the  cheaper  it  becomes  there,  ajid  as  soon  as  Uiese  prices 
are  equal,  the  exportation  stops  of  course." 

The  demoralizing  effect  of  the  poor  laws,  he  exposes  in  his  address  en- 
titled "  On  the  Price  of  Corn  and  Management  of  the  Poor."  "  The  day," 
says  he,  "  you  passed  that  act,  you  took  away  from  before  their  eyes  the 
2>eiitest  of  all  inducements  to  industry,  frugality,  and  sobriety,  by  giving 


rOLITICAL   ECONOMV.  47 

them  a  dependaiice  oa  somewhat  else  than  a  careful  accumulaiiou  during  Kconomioal 
youth  and  health,  for  support  in  age  and  sickness  :  in  short,  you  offered  a  Science  in 
premium  for  the  encouragement  of  idlene^."  Amcnca. 

See  also.  On  paper  m(jney,  in  answer  to  the  Report  of  the  Board  of 
Trade,  1764.  Canada  Pamphlets,  1760.  Positions  to  be  examined,  &c. 
1769.  Observations  on  War,  on  Luxury,  Idleness,  and  Industry.  And  for 
a  practical  application  of  principles  to  individual  success,  see  his  "  Way 
to  Wealth,"  '^  Poor  Richard's  Almanac,"  &c. 

Not  his  country  only,  but  the  world  at  large,  is  indebted  to  him  for  his 
labours  towards  the  abolition  of  slavery  and  the  slave  trade,  and  the  miti- 
gation of  the  needless  miseries  of  war,  by  putting  a  stop  to  all  privateering, 
and  injury  of  individual  property.  On  this  subject,  he  published  a  tract 
entitled,  "  Reasons  against  Privateering,  &c."  He  was  a  peace  maker 
upon  principles,  not  only  of  humanity,  but  of  political  calculation — upon 
tlie  ground  tliat  peace  was  the  natural  and  true  policy  of  all  governments. 
"  What  vast  additions,''  says  he  in  a  letter  to  Hartley,  "  to  the  convenience 
and  comfort  of  living  might  we  acquire,  if  the  money  spent  in  war  had 
been  employed  in  works  of  public  utility,  what  an  extension  of  agriculture 
even  to  the  tops  of  the  mountains." 

The  only  writer  we  shall  notice  subsequent  to  our  Revolution,  is  one 
who  gave  tone  and  direction,  by  his  official  productions,  to  the  vacillating 
policy  and  jarring  interests  of  the  new  confederation.  This  is  Alexander 
Hamilton,  whose  various  official  reports  while  Secretary  of  the  Treasury, 
give  evidence  of  the  acuteness  and  versatile  powers  of  his  mind.  They 
consist  in, 
A  Report  on  Public  Credit,  in  1790. 
"  A  National  Bank. 

"  The  Constitutionality  of  a  National  Bank,  1791. 

"  The  subject  of  Manufactures,  1790. 

"  The  establishment  of  a  Mint. 

And  to  these  may  properly  be  annexed,  the  Report  on  the  coinage  in  tlie 
same  year,  by  Thomas  Jefferson,  Secretary  of  State. 

Of  these,  the  most  interesting  as  it  has  been  the  most  influential,  in  oui 
national  policy,  is  that  on  manufactures.  As  the  principles  of  this  Report 
have  sometimes  been  so  far  misunderstood  as  to  be  placed  in  direct  opposi- 
tion to  the  school  of  Adam  Smith,  a  short  analysis  of  it  may  not  be  without 
its  popular  use. 

"  The  expediency  of  encouraging  domestic  manufactures,"  which  is  the 
object  of  the  Report,  he  rests  not  upon  reasoning  but  upon  facts — upon  cir- 
cumstances which  create  an  exception  to  general  rules.  In  the  case  of  this 
country  they  were,  as  stated  by  him,  "  the  embarrassments  which  obstruct- 
ed the  progress  of  our  external  trade,"  and  "  the  restrictive  regulations 
which  in  foreign  markets  abridged  the  vent  of  the  increasing  surplus  of 
our  agricultural  produce.'' 

The  general  reasoning  with  which  the  Report  commences,  is  sound  and 
conclusive,  being  either  in  accordance  with  Adam  Smith,  or  possessing 
the  still  higher  merit  of  pointing  out  the  error  of  that  agricultural  bias 
which  marks  his  work,  and  which  is  now  universally  admitted  to  be  erro- 
neous. His  argument  lies  against,  1.  The  French  economists,  or  those  whft 
maintained  agriculture  to  be  the  only  productive  labour,  and  2.  Against. 
Adam  Smith,  who  held  it  to  be,  though  not  the  only,  yet  certainly  its 
most  productive  form.  On  tliis  latter  point,  Hamilton  may  be  said,  in 
some  measure  to  antedate  the  discovery  of  the  school  of  Ricardo  ;  viz.  that, 
rent  is  the  result  not  of  the  superior  but  of  the  limited  productiveness  of 
the  soil,  and  that  if  any  distinction  is  to  be  drawn  between  manufactures  • 
and  agriculture,  it  is  that  "the  labour  employed  in  manufactures  being  at 
once  more  constant,  (as  to  time)  more  uniform,  (as  to  power)  and  more 
ingenious,  (as  to  the  applicability  of  machinery)  will  be  found  at  the  same 
time  more  productive.''  But  of  their  productiveness,  he  rather  maintains 
the  equality.  "  Each  furnishes  a  certain  portion  of  the  produce  of  his 
labour,  and  each  destroys  a  correspondent  portion  of  the  produce  of  the 
labour  of  the  other.  In  the  mean-time  the  maintenance  of  two  citizens  in- 
stead of  one  is  going  on  :  the  state  has  two  members  instead  of  one  ;  and 
they  together  consume  twice  the  value  of  what  is  produced  from  the 
land."  "  Hence  the  produce  of  the  labour  of  the  two  farmers  would  not 
be  greater  than  the  produce  of  the  labour  of  the  farmer  and  artificer,  and 
hence  it  results,  that  the  labour  of  the  artificer  is  as  positively  produf- 


48 


POLITICAL    ECONOMf* 


-America. 


Economical  tive  as  tliat  of  the  farmer,  and  as  positively  augments  the  revenue  of  £0- 
Scieiioe  in      ciety." 

In  passing  to  the  consideration  of  the  main  object  of  the  Report,  he 
fully  acknowledges  the  advantages  that  would  flow  from  the  general  adop- 
tion among  nations,  of  "  the  system  of  perfect  liberty  and  free  trade."  "  In 
such  a  state  of  things,"  says  he,  "  each  country  would  have  the  full  benefit 
of  its  peculiar  advantages  to  compensate  for  its  deficiencies  or  disadvan- 
lages.  If  one  nation  were  in  a  condition  to  supply  manufactured  articles 
on  better  terms  than  another,  that  other  might  find  an  abundant  indemnifi- 
cation in  a  superior  capacity  to  furnish  the  produce  of  the  soil.  And  a 
free  exchange  mutually  beneficial  of  the  commodities  which  each  was  able 
to  supply  on  the  best  terms,  might  be  carried  on  between  them,  sup^jorting 
in  full  vigour  the  industry  of  each." 

The  reasons  of  expediency,  which,  in  the  opinion  of  the  Secretary,  jus- 
tified a  departure  fiom  this  wise  and  liberal  policy,  it  is  not  within  the  prO' 
vince  of  these  notes  to  examine.  It  is  sufficient  that  he  placed  it  upon 
reasons  that  were  peculiar  in  their  nature  and  temporary  in  their  influence ; 
"dictated  to  the  country,"  as  he  observes,  "  by  the  imperious  force  of  a 
very  peculiar  situation."  The  United  States  being  at  that  time,  as  he 
justly  states,  "  to  a  certain  extent,  in  the  situation  of  a  country  precluded 
from  foreign  commerce." 

If  it  may  be  permitted  liowever  to  the  writer  to  express  an  opinion,  it 
would  be,  in  concurrence  with  the  Report,  that  the  peculiar  circumstances 
of  a  government  recently  established  amid  jarring  interests  with  the  re- 
sources of  the  country  paralyzed  by  the  exhaustion  of  a  civil  war — without 
capital  at  home,  and  without  credit  abroad — rendered  it  the  soundest  policy 
of  the  rulers  to  arouse,  by  whatever  means  were  found  most  efficient,  the 
slumbering  energies  of  the  nation,  and  to  fortify  and  extend,  for  a  time,  that 
internal  commerce  over  which  they  had  the  fullest  control. 

But  the  essential  policy  and  permanent  usefulness  of  bounties  and  restric- 
tions, which  are  equivalent  to  them,  is  another  question.  And  should 
manufactures  continue  to  need  them  under  more  favourable  circumstances, 
to  use  the  language  of  the  Report,  "  a  presumption  would  arise  in  every 
such  case,  that  there  were  natural  and  inherent  impediments  to  success." 


For  the  length  of  this  note,  if  any  apology  is  due  from  an  American  Edi- 
tor to  an  American  public,  it  must  be  found  in  his  anxiety  to  set  forth  the 
just  claims  of  his  countrymen,  however  small,  to  the  merit  of  advancing  a 
science  which  bids  fair  to  regenerate  the  world  by  uniting  the  nations  of 
the  earth  in  the  bonds  of  common  peace  and  mutual  benefit. — £. 


uistinction  The  practical  part  of  the  science  of  Political  Economy  was 
Pomfcs'and  long  confounded  with  that  of  Politics  ;  and  it  is  undoubtedly  true 
i-oiiticai       that  thev  are  very  intimately  connected,  and  that  it  is  frequently 

.ICcononiv  .  .  i  •/ 

impossible  to  treat  those  questions  which  strictly  belong  to  the 
one  without  referring  more  or  less  to  the  principles  and  conclu- 
sions of  the  other.  But,  in  their  leading  features,  they  are  suf- 
ficiently distinct.  The  laws  which  regulate  the  production 
and  distribution  of  wealth  are  the  same  in  every  country  and 
stage  of  society.  Those  circumstances  which  are  favourable 
or  unfavourable  to  the  increase  of  riches  and  population  in  a 
republic  may  equally  exist,  and  will  have  exactly  the  same  ef- 
fects, in  a  monarchy.  That  security  of  property,  without  which 
there  can  be  no  steady  and  continued  exertion — that  freedom 
of  engaging  in  every  different  branch  of  industry,  so  necessary 
to  call  the  various  powers  and  resources  of  human  talent  and 
ingenuity  into  action — and  that  economy  in  the  public  expendi- 
ture, so  conducive  to  the  accumulation  of  national  wealth — are 
not  the  exclusive  attributes  of  any  particular  species  of  govern- 
ment. If  free  states  generally  make  the  most  rapid  advances  in 
wealth  and  population,  it  is  an  indirect  rather  than  a  direct  con- 
sequence of  their  political  constitution.     It  results  more  from 


POLITICAL   ECONOMY.  49 

the  greater  certainty  which  a  popular  government  presents  that  Distinction 
the  right  of  property  will  be  held  sacrcil — that  the  freedom  of  ,.'J,,7t*es''and 
industry  will  be  less  fettered  and  restricted,— and  that  the  pub-  |°'^;;^^y 
lie  income  will  be  more  judiciously  levied  and  expended,  than 
from  the  circumstance  of  a  greater  proportion  of  the  people  be- 
ing permitted  to  exercise  political  rights  and  privileges.  Give 
the  same  securities  to  the  subjects  of  an  absolute  monarch,  and 
they  will  make  the  same  advances.  Industry  does  not  require 
to  be  stimulated  by  extrinsic  advantages.  The  additional  com- 
forts and  enjoyments  which  it  procures  have  always  been  found 
sufficient  to  ensure  the  more  persevering  and  successful  exer- 
tions. And  whatever  rhay  have  been  the  form  of  government, 
those  countries  have  always  advanced  in  the  career  of  improve- 
ment, in  which  the  public  burthens  have  been  moderate,  the 
freedom  of  industry  permitted,  and  every  individual  enabled 
peaceably  to  enjoy  the  fruits  of  his  labour.  It  is  not,  therefore, 
so  much  on  its  political  organization,  as  on  the  talents  and  spirit 
of  its  rulers,  that  the  wealth  of  a  country  is  principally  depen- 
dant. Economy,  moderation,  and  intelligence  on  the  part  of 
those  in  power,  have  frequently  elevated  absolttte  monarchies 
to  a  very  high  degree  of  opulence  and  of  prosperity  ;  while,  on 
the  other  hand,  all  the  advantages  derived  from  a  more  liberal 
system  of  government  have  not  been  able  to  preserve  free  states 
from  being  impoverished  and  exhausted  by  the  extravagance, 
intolerance,  and  shortsighted  policy  of  their  rulers. 

The  sciences  of  Politics  and  of  Political  Economy  are,  there- 
fore, sufficiently  distinct.  The  politician  examines  the  princi- 
ples on  which  all  government  is  founded,  he  endeavours  to  de- 
termine in  whose  hands  the  supreme  authority  may  be  most  ad- 
vantageously placed, — and  unfolds  the  reciprocal  duties  and 
obligations  of  the  governing  and  governed  portions  of  society. 
The  political  economist  does  not  take  so  high  a  flight.  It  is  not 
of  the  constitution  of  the  government,  but  of  its  acts  only,  that 
he  presumes  to  judge.  Whatever  measures  affect  the  produc- 
tion or  distribution  of  wealth,  necessarily  come  within  the  scope 
of  his  observation,  and  are  canvassed  by  him.  He  examines 
whether  they  are  in  unison  with  the  just  principles  of  economi- 
cal science.  If  they  are,  he  pronounces  them  to  be  advanta- 
geous, and  shows  the  nature  and  extent  of  the  benefits  of  which 
they  will  be  productive  ;  if  they  are  not,  he  s'hows  in  what  re- 
spect they  are  defective,  and  to  what  extent  their  operation 
will  be  injurious.  But  he  does  this  without  inquiring  into  the 
constitution  of  the  government  by  which  these  measures  have 
been  adopted.  The  circumstance  of  their  having  emanated 
from  the  privy  council  of  an  arbitrary  monarch,  or  the  repre- 
sentative assembly  of  a  free  state,  though  in  other  respects  of 
supreme  importance,  cannot  affect  the  immutable  principles  by 
which  the  economist  is  to  form  his  opinion  upon  them. 

Besides  being  confounded  with  politics,  the  practical  part  of  D^ncik.!^^ 
Political  Economy  has  frequently  been  confounded  with  Statis-  ti>tics  and 
tics  ;  but  they  are  still  more  easily  separated  and  distinguished.  Economv. 
The  object  of  the  statistician  is  to  describe  the  condition  of  a 
particular  country  at  a  particular  period  ;  while  the  object  of 
the  political  economist  is  to  discover  the  causes  which  have 
brought  it  into  that  condition,  and  the  means  by  which  its  wealth 


Economy. 


SO  POLITICAL    ECONOMY. 

Distinction  and  riches  may  be  indefinitely  increased.  He  is  to  the  statisti- 
f^isti^rand'*  cian  what  the  physical  astronomer  is  to  the  mere  observer.  He 
Poiiticai  takes  the  facts  furnished  by  the  researches  of  the  statistician, 
and  after  companng  them  with  those  furnished  by  historians 
and  travellers,  he  applies  iiimself  to  discover  their  relation. 
By  a  patient  induction — by  carefully  observing  the  circumstances 
attending  the  operation  of  particular  principles,  he  discovers 
the  effects  of  which  they  are  really  productive,  and  how  far 
they  are  liable  to  be  modified  by  the  operation  of  other  princi- 
ples. It  is  thus  that  the  relation  between  rent  and  profit — be- 
tween profit  and  wages,  and  the  various  general  laws  which  re- 
gulate and  connect  the  apparently  clashing,  but  really  harmoni- 
ous interests  of  every  different  order  in  society,  have  been  dis- 
covered and  established  with  all  the  certainty  of  demonstrative 
evidence. 


PART  II. 

PRODUCTION  OF  WEALTH. 

Sect.  I. — Definition  of  Production — Labour  the  only  source  of 

Wealth. 

Definition  of      All  the  Operations  of  nature  and  of  art  are  reducible  to,  and 
froduction.    j.ga)]y  consist  of  transmutations, — of  changes  of  form   and  of 
place.     By  production,  in  the  science  of  Political  Economy,  we 
are  not  to  understand  the  production  of  matter,  for  that  is  ex- 
clusively the  attribute  of  Omnipotence,  but  the  production  of 
utility,  and  consequently  of  exchangeable  value,  by  appropria- 
ting and  modifying  matter  already  in  existence,  so  as  to  fit  it  to 
Labour  the  satisfy  our  v/ants,  and  to  contribute  to  our  enjoyments.     The 
of'wedth!'  labour  which  is  thus  employed  is  the  only  source  of  wealth.* 

*  This  point  has  been  strongly  and  ably  stated  by  M.  Destutt  Tracy — 
"Non  seulement,""  says  he,  "nous  ne  creons  jamais  rien,  mais  il  nous  est 
meme  impossible  de  eoncevoir  ce  que  c'est  que  creer  ou  anneantir,  si  nous 
entendons  rigoureusement  par  ces  mots,  faire  quelque  chose  de  rien,  ou  re- 
duire  quelque  chose  a  rien;  car  nous  n'avons  jamais  vu  un  etre  quelconque 
sortir  du  neant  ni  y  rentrer.  De  la  cet  axiome  admis  par  toute  I'antiquite : 
rien  ne  vient  de  rien,  et  ne  peut  redevenir  7ie7i.  Que  faisons-nous  done 
par  notre  travail,  par  noire  action  sur  tous  les  etres  qui  nous  entourent? 
Jamais  rien,  qu'operer  dans  ces  etres  des  changements  de  forme  on  de  lieu 
qui  les  approprient  a  notre  usage,  qui  les  rendent  utiles  a  la  satisfaction  de 
nos  besoins.  Voila  ce  que  nous  devons  entendre  par  produire ;  c'est  don- 
ner  au.v  choses  une  uli/iii-  quellcs  navoient  pas.  Quel  que  soit  notre  U-a- 
vail,  sM  u"en  resulte  point  d  utilile,  il  est  infrticteux ;  s'il  en  resulte,  il  est 
product  if.'''' — {Elemens  d'Ideologie,  Tome  III.  p.  162.) 

"  Not  only  do  we  create  nothing,  but  it  is  even  impossible  for  us  to  con- 
(;eive  the  meaning  ol  the  terms  create  and  destroy,  if  we  use  them  in  their 
strict  sense ;  for  we  have  never  seen  any  thnig  existing,  either  to  proceed 
out  of  nothing  or  to  return  to  it  again.  Hence  tlie  received  axiom  of  an- 
tiquity, "Nothinj,  can  proceed  from  nothing."  What  do  we  then  by  our 
labour  and  operations  on  things  around  us  ^  Simply  nothing  but  to  effect 
in  them  certain  changes  of  form  or  place,  which  appropriates  them  to  our 
use,  or  which  renders  them  suitable  to  the  supply  of  our  wants.  This  is 
■what  we  are  to  understand  by  the  teim  production ;  it  is  to  give  to  things  a 
utility  wliich  before  tliey  did  not  possess.  Whatever  be  our  labour,  if  utility 
do  not  result  from  it,  it  is  unfruitful ;  if  it  do  restilt  from  it,  it  is  produc- 
tive."— (Elements  of  Metaphysics.) — E. 


POLITICAL    ECONOMY.  51 

Nature  spontaneously  furnishes  the  matter  of  which  commodi-  Labour  the 
ties  itre  made  :  but,  independently  of  Inbour,  matter  is  rarely  ""'maUh!* 
of  any  use  whatever,  and  is  never  of  any  value.  Place  us  on 
the  banks  of  a  river,  or  in  an  orchard,  and  we  shall  infallibly  pe- 
rish, either  of  thirst  or  hunger,  if  we  do  not,  by  an  effort  of  indus- 
try,* raise  the  water  to  our  lips,  or  pluck  the  fruit  from  its  pa- 
rent tree.  It  is  stjldom,  however,  that  the  mere  appropriation 
of  matter  is  sufficient.  In  the  infinite  majority  of  cases,  labour 
is  required  not  only  to  appropriate  it,  but  also  to  convey  it  from 
place  to  place,  and  to  give  it  that  peculiar  figure  and  shape, 
without  which  it  may  be  totally  useless, .and  incapable  of  either 
ministering  to  our  necessities  or  our  comforts.  The  coal  used 
in  our  fires  is  buried  deep  in  the  bowels  of  the  earth,  and  is  ab- 
solutely worthless  until  the  labour  of  the  miner  has  extracted  it 
from  the  mine,  and  brought  it  into  a  situation  where  it  can  be  made 
use  of.  The  stones  and  mortar  of  which  our  houses  are  built, 
and  the  rugged  and  shapeless  materials  from  which  the  various 
articles  of  convenience  and  ornament  with  which  they  are  fur- 
nished have  been  prepared,  were,  in  their  original  state,  alike 
destitute  of  value  and  utility.  And  of  the  innumerable  variety 
of  animal,  vegetable,  and  mineral  products  which  form  the  ma- 
terials of  our  food  and  clothes,  none  were  originally  service- 
able, and  many  were  extremely  noxious  to  man.  It  is  his  la- 
bour that  has  given  them  utility,  that  has  subdued  their  bad  qua- 
lities, and  made  them  satisfy  his  wants,  and  minister  to  his  com- 
forts and  enjoyments.  "  Labour  was  the  first  price,  the  origi- 
nal purchase  money  that  was  paid  for  all  things.  It  was  not  by 
o-old  or  by  silver,  but  by  labour,  that  all  the  wealth  of  the  world 
was  originally  purchased." — (^Wealth  of  Nations,  Vol.  I.  p.  44. 
8vo.  edit.) 

If  we  observe  the  progress,  and  trace  the  history  of  the  hu- 
man race  in  different  countries  and  states  of  society,  we  shall 
find  their  comfort  and  happiness  to  have  been  always  nearly 
proportioned  to  the  power  which  they  possessed  of  rendering 
their  labour  effective  in  appropriating  the  raw  products  of  na- 
ture, and  in  fitting  and  adapting  matter  to  their  use.  The 
savage,  whose  labour  is  confined  to  the  gathering  of  wild  fruits, 
or  to  the  picking  up  of  the  shell  fish  on  the  sea  coast,  is  placed  at 
the  very  bottom  of  the  scale  of  civilization,  and  is,  in  point  of 
comfort,  decidedly  inferior  to  many  of  the  lower  animals.  The 
first  step  in  the  progress  of  society  is  made  when  man  learns  to 

*  To  term  these  oi-dinary  acts,  efforts  of  industry^  seems  an  overstrained 
application  of  language ;  they  are  essential  to  all  consumption,  which  ne- 
cessarily involves  some  bodily  effort,  great  or  small,  and  should  not,  there- 
fore, be  regarded  in  the  examination  of  that  labour  which  is  necessary  to 
production.  This  fallacy  arises  from  our  author  insisting  upon  labour,  as 
the  sole  source  of  wealth, — which  may  be  regarded  as  one  of  the  peculiar 
doctrines  of  this  school.  It  is  a  position  rather  morally  than  scientifically 
true ;  without  labour  there  can  be  no  production  of  wealth  ;  but  then, 
without  the  raw  materials  which  the  earth  supplies,  labour  would  neces- 
sarily I  e  unproductive.  It  seems,  therefore,  more  natural  and  just  to  re- 
gard wealth,  or  products  which  constitute  it,  as  the  combined  result  of  the 
energies  of  labour  and  the  productive  powers  of  the  soil, — labour  being- 
further  aided  in  its  powers,  as  society  advances,  by  the  natural  agents 
which  science  calls  into  operation,  and  by  those  surplus  products  which, 
under  the  name  of  capital,  introduces  machinery  and  subdivision  of  la-^ 
bour. — E. 


52  POLITICAL    ECONOMY, 

Labour  the  hunt  wild  animals,  to  feed  himself  with  their  flesh,  and  to  clothe 
of  Wealtir  himself  with  their  skins.  -But  labour,  when  confined  to  the 
chase,  is  extremely  barren  and  unproductive.  Tribes  of  hun- 
ters, like  beasts  of  prey,  whom  they  are  justly  said  to  resemble 
closely  in  their  habits  and  modes  of  subsistence,  are  but  thinly 
scattered  over  the  surface  of  the  country  which  they  occupy  ; 
and  notwithstanding  the  fewness  of  their  numbers,  any  unusual 
deficiency  in  the  supply  of  game  never  fails  to  reduce  them 
to  the  extremity  of  want.  The  second  step  in  the  progress  of 
society  is  made  when  the  tribes  of  hunters  and  fishers  apply 
their  labour,  like  the  ancient  Scythians  and  modern  Tartars,  to 
the  domestication  of  wild  animals  and  the  rearing  of  flocks. 
Their  subsistence  is  much  less  precarious  than  that  of  hunters, 
but  they  are  almost  entirely  destitute  of  all  those  comforts  and 
elegancies  which  give  to  civilized  life  its  chief  value.  The  third 
and  most  decisive  step  in  the  progress  of  civilization — in  the 
great  art  of  producing  the  necessaries  and  conveniencies  of 
life — is  made  when  the  wandering  tribes  of  hunters  and  shep- 
herds renounce  their  migratory  habits,  and  become  agricultu- 
ralists and  manufacturers.  It  is  then,  properly  speaking,  that 
man,  shaking  off"  that  indolence  which  is  natural  to  him,  begins 
fully  to  avail  himself  of  the  productive  powers  of  industry. 
He  then  becomes  laborious,  and,  by  a  necessary  consequence, 
his  wants  are  then,  for  the  first  time,  fully  supplied,  and  he  ac- 
quires an  extensive  command  over  the  articles  necessary  to  his 
comfort  as  well  as  his  subsistence. 
The  Earth  However  paradoxical  the  assertion  may  at  first  sight  appear. 
of  Wealth?^  it  is,  notwithstanfUng,  unquestionably  true  that  the  earth  does 
not  gratuitously  supply  us  with  a  single  atom  of  wealth.  It  is  a 
powerful  machine  given  by  Providence  to  man  ;  but  without 
labour  this  machine  would  be  altogether  useless,  and  would  for 
ever  stand  idle  and  unemployed.  It  is  to  labour  that  the  pro- 
ducts of  the  earth  owe  their  value,  and  it  is  by  its  intervention 
that  they  become  useful.  The  surface  of  the  earth  is,  in  its  na- 
tural state,  covered  with  fruits  and  game  ;  its  bowels  contain  an 
infinite  variety  of  mineral  products  ;  its  seas  and  rivers  are  sto- 
red with  fish,  and  it  is  endowed  with  inexhaustible  vegetative  and 
productive  powers  ;  but  all  these  powers  and  products  are 
plainly  of  no  use  whatever,  and  have  no  value,  until  the  labour 
of  man  has  called  the  former  into  action,  and  appropriated  the 
latter,  and  given  them  that  pecuhar  form  which  is  required  to 
fit  them  to  support  his  existence,  or  to  increase  his  enjoyments. 
Opinion  of  The  importance  of  labour  in  the  production  of  wealth  was 
jiobbes.  very  clearly  perceived  both  by  Hobbes  and  Locke.  At  the  com- 
mencement of  the  24th  chapts^r  (entited,  "  Of  the  JVittritio7i  and 
Procreation  of  a  Commonwealth^'')  of  the  Leviathan,  published 
in  1651,  Hobbes  says,  "  The  nutrition  of  a  commonwealth  con- 
sisteth  in  the  plenty  and  distribution  of  materials  conducing  to 
life. 

"  As  for  the  plenty  of  matter,  it  is  a  thing  limited  by  nature 
to  those  commodities  which,  from  (the  two  breasts  of  our  com- 
mon mother)  land  and  sea,  God  usually  either  freely  giveth,  or 
for  labour  selleth  to  mankind. 

"  For  the  matter  of  this  nutriment,  consisting  in  animals,  ve- 
getables, minerals.  God  hath  freely  laid  them  before  u?,  in  or 


POLITICAL   ECONOftrt  .  OO 

near  to  tlie  lUce  of  the  earth  ;  so  as  there  needeih  no  more  but  Labour  ti.R 
the  labour  and  industry  of  receiving  them.    Insomuch  that  plen-  "f'w^oaUh." 
ty  dependeth  (next  to  God's  favour)  07i  the  labour  and  industry 
of  man.  ^^ 

But  Mr.  Locke  had  a  much  clearer  apprehension  of  this  doc-  Opinion  oV 
trine.  In  his  Essa^  on  Civil  Government,  published  in  1689,  he 
has  entered  into  a  lengthened,  discriminating,  and  able  analy- 
sis to  show  that  it  is  from  labour  that  the  products  of  the  earth 
derive  almost  all  their  value.  "  Let  any  one  consider,"  says 
lie,  "  what  the  difference  is  between  an  acre  of  land  planted 
with  tobacco  or  sugar,  sown  with  wheat  or  barley,  and  an  acre 
of  the  same  land  lying  in  common,  without  any  husbandry  upon 
it,  and  he  will  find  that  the  improvement  of  labour  makes  the 
far  greater  part  of  the  value.  I  think  it  will  be  but  a  very 
modest  computation  to  say,  that  of  the  products  of  the  earth 
useful  to  the  life  of  man,  nine-tenths  are  the  effects  of  labour  ; 
nay,  if  we  will  rightly  consider  things  as  they  come  to  our  use, 
and  cast  up  the  several  expenses  about  them,  what  in  them  is 
purely  owing  to  nature,  and  what  to  labour,  we  shall  find,  that 
in  most  of  them  ninety-nine  hundredths  are  wholly  to  be  put  on 
the  account  of  labour. 

"  There  cannot  be  a  clearer  demonstration  of  any  thing,  than 
several  nations  of  the  Americans  are  of  this,  who  are  rich  iu 
land,  and  poor  in  all  the  comforts  of  life  ;  whom  nature  having 
furnished  as  liberally  as  any  other  people  with  the  materials  of 
plenty  ;  i.  e.  a  fruitful  soil  apt  to  produce  in  abundance  what 
might  serve  for  food,  raiment,  and  delight ;  yet  for  want  of  im- 
proving it  by  labour,  have  not  one  hundredth  part  of  the  con- 
veniencies  we  enjoy  ;  and  the  king  of  a  large  and  fruitful  terri- 
tory there  feeds,  lodges,  and  is  worse  clad  than  a  day-labourer 
in  England. 

"  To  make  this  a  little  clear,  let  us  but  trace  some  of  the  or- 
dinary provisions  of  life  through  their  several  progresses,  before 
they  come  to  our  use,  and  see  how  much  of  their  value  they  re- 
ceive from  human  industry.  Bread,  wine,  and  cloth,  are  things 
of  daily  use,  and  great  plenty ;  yet,  notwithstanding,  acorns, 
water,  and  leaves,  or  skins,  must  be  our  bread,  drink,  and  cloth- 
ing, did  not  labour  furnish  us  with  these  more  useful  commodi- 
ties ;  for  whatever  bread  is  more  worth  than  acorns,  wine  than 
water,  and  cloth  or  silk  than  leaves,  skins,  or  moss,  that  is  solely 
owing  to  labour  and  industry  ;  the  one  of  these  being  the  food 
and  raiment  which  unassisted  nature  furnishes  us  with  ;  the 
other  provisions  which  our  industry  and  pains  prepare  for  us  : 
which  how  much  they  exceed  the  other  in  value,  when  any  one 
hath  computed,  he  will  then  see  how  much  labour  makes  the  far 
greatest  part  of  the  value  of  things  we  enjoy  in  this  world  ;  and 
the  ground  which  produces  the  materials  is  scarcely  to  be  reck- 
oned on  as  any,  or,  at  most,  but  a  very  small  part  of  it. 

"An  aci-e  of  land  that  bears  here  twenty  bushels  of  wheat,  and 
another  in  America,  which  with  the  same  husbandry,  would  do 
the  Uke,  are,  without  doubt,  of  the  same  natural  intrinsic  value. 
But  yet,  the  benefit  mankind  receives  from  the  one  in  a  year  is 
worth  L.  5,  and  from  the  other  possibly  not  worth  one  penny  : 
if  all  the  profit  an  Indian  received  from  it  were  to  be  valued  and 
sold  here,  at  least,  I  may  truly  say,  not  j^Vo- — "Tis  labour,  then 


54  rOLITICAL    E<*,ONOMV". 

Labour  the  wliich  puts  the  gFcatcst  part  of  value  upon  land,  without  "which 
of  Wealth'!^  r^  wo^ild  scarcely  be  roorth  any  thing  :  'Tis  to  that  we  owe  the 
greatest  part  of  its  useful  products  ;  for  all  that  the  straw,  bran, 
bread,  of  that  acre  of  wheat,  is  more  worth  than  the  pro- 
duct of  an  acre  of  good  land  which  lies  waste,  is  all  the  effect 
of  labour.  For  "'tis  not  merely  the  ploughman's  pains,  the  rea- 
per's, and  thrasher's  toil,  and  the  baker's  sweat,  is  to  be  count- 
ed into  the  bread  we  eat,  the  labour  of  those  who  broke  the 
oxen,  who  digged  and  wrought  the  iron  and  stones,  who  fitted 
and  framed  the  timber  employed  about  the  plough,  mill,  oven, 
or  any  other  utensils,  which  are  a  vast  number,  requisite  to  this 
corn,  from  its  being  seed  to  be  sown,  to  its  being  made  bread, 
must  all  be  charged  on  the  account  of  labour,  and  received  as 
;in  efiect  of  that.  Nature  and  the  earth  furnishing  only  the  al- 
most worthless  materials  as  in  themselves. — 'Twould  be  a 
strange  catalogue  of  things  that  industry  provided  and  made  use 
of  about  every  loaf  of  bread,  before  it  came  to  our  use,  if  we 
could  trace  them.  Iron,  wood,  leather,  barks,  timber,  stone, 
i)rick,  coals,  lime,  cloth,  dyeing-drugs,  pitch,  tar,  masts,  ropes, 
and  all  the  materials  made  use  of  in  the  ship  that  brought  away 
the  commodities  made  use  of  by  any  of  the  workmen,  to  any 
part  of  the  work  ;  all  which  it  would  be  almost  impossible,  at 
least  too  long  to  reckon  up."      {Of  Civil  Government,  Book  II. 

0  40,  41,  42,  and  43.)* 

Had  Mr.  Locke  carried  his  analysis  a  little  lurther,  he  could 
not  have  failed  to  perceive  that  neither  water,  leaves,  skins,  nor 
any  of  the  spontaneous  productions  of  nature,  have  any  value, 
except  what  they  owe  to  the  labour  required  to  appropriate 
them.  The  value  of  water  to  a  man  placed  on  the  bank  of  a 
river  depends  on  the  labour  necessary  to  raise  it  from  the  river 
to  his  lips  ;  and  its  value,  when  carried  ten  or  twenty  miles  off, 
is  equally  dependant  on  the  labour  necessary  to  convey  it  there. 
All  the  rude  products,  and  all  the  productive  powers  and  capa- 
cities of  nature,  are  gratuitously  offered  to  man.  Nature  is  not 
niggardly  or  parsimonious.  She  neither  demands  nor  receives 
an  equivalent  for  her  favours.  An  object  which  it  does  not  re- 
([uire  any  portion  of  labour  to  appropriate  or  to  adapt  to  our 
use,  may  be  of  the  very  highest  utility  ;  but,  as  it  is  the  free 
gift  of  nature,  it  is  utterly  impossible  it  can  be  possessed  of  the 
smallest  value. t 

*  This  is  a  very  remarkable  passage.    It  contains  a  far  more  distinct  and 

1  omprehensive  statement  of  the  fundamental  doctrine,  that  labour  is  the 
loustituent  principle  of  value,  than  is  to  be  found  in  any  other  writer  pre- 
vious to  Dr.  Smith,  or  than  is  to  be  found  even  in  the  Wealth  of  Mifmis. 
But  Mr.  Locke  docs  not  seem  to  have  been  sufficiently  aware  of  the  real 
value  of  the  principle  he  had  elucidated,  and  has  not  deduced  from  it  any 
important  practical  conclusion.  On  the  contrary,  in  his  tract  on  the  Rais- 
i/ig  of  the  Value  of  Money,  published  in  1691,  he  lays  it  down  broadly  that 
:\\\  taxes,  howsoever  imposed,  must  ultimately /«//  on  the  land :  whereas,  it 
is  plain  he  ouglit,  consistently  with  the  above  principle,  to  have  shown  that 
Uiey  would  fall,  not  exclusively  on  the  produce  of  land,  but  generally  on 
the  ■produce  of  industry,  or  on  all  species  of  commodities. 

t  That  this  unqualified  assertion  requires  limitation  is  abundantly  evi- 
dent. It  proceeds  on  the  supposition  that  whatever  nature  gives  freely 
'lie  gives  unlimitcdly.  IJut  this  is  not  the  fact: — wild  fruits,  precious 
f^tones,  and  metals,  water-springs  in  sterile  countries,  may  all  be  lighted 
upon  by  accident,  and  acquii'ed  without  labour;  but  they  are  not  there- 


POLITICAL    ECONOMY.  oO 

<'  Si  je  relranche,''  to  use  a  striking  illustration  ol'  this  doc-  Labour  the 
irine  given  by  M.  Canard,  "  de  ma  montre,  par  la  pensee  tons  les  "f'wwuT 
travaux  qui  lui  ont  ete  successivement  appliquees,  il  ne  resterai 
que  quelques  grains  de  mineral  placces  dans  I'interieur  de  la 
terre  d'ou  on  les  a  tires,  et  ou  ils  n'ont  aucune  valour.  Dc 
meme  si  je  decompose  le  pain  que  je  mange,  ct  que  j'en  re- 
tranche  successivement  tous  les  travaux  successifs  qu'il  a  recus 
il  ne  restera  que  quelques  tiges  d'herbcs,  graminees,  eparses 
dans  des  deserts  incultes,  et  sans  aucune  valeur.''  (Principes 
(P  Economie  Politique^  p.  6.)* 

It  is  to  labour,  therefore,  and  to  labour  only,  that  njan  oues 
every  thing  possessed  of  exchangeable  value.  Labour  is  the 
talisman  that  has  raised  him  from  the  condition  of  the  savage — 
that  has  changed  the  desert  and  the  forest  into  cultivated  fields — 

fore  destitute  of  exchangeable  value — for  they  are  limited  in  quantity,  and 
«nce  appropriated,  become  immediately  the  subject  of  exchange.  Othe'- 
instances  of  value  resulting,  not  from  labour,  but  from  the  agency  of  na- 
ture, and  the  delayed  returns  of  capital,  may  easily  be  found  :  for  exam- 
ple, take  a  case  of  fermentation,— a  cask  of  wine  ripened  by  age,  is  doubled 
.jr  trebled  in  value,  without  the  addition  of  any  labour.  In  this  case  we 
pay  the  interest  of  a  delayed  capital. 

Notwithstanding  our  author's  caution  in  the  use  of  terms,  he  has  occa- 
sionally obscured  this  subject,  by  the  indiscriminate  application  of  tlie  terms 
irealth  and  value.  These  terms,  however,  as  already  stated,  are  far  from 
convertible.  Of  wealth,  labour  is  certainly  not  the  only  source,  tliough  an 
essential  element,  and  one  primarily  demanded.  The  productive  powers  of 
the  soil  and  all  other  natural  agents,  constitute  a  second,  and  the  powers 
of  capital  a  third ;  all  which  concur  in  production,  and  consequently  in  the 
advancement  of  wealth. 

Ao-ain,  of  exchangeable  value  there  are  two  elements,  viz.  labour  an'l 
capital.  Natural  agents  are  here  excluded,  since  they  are  either  gratuitous 
in  use,  such  as  air,  steam.  &c.  or  if  rent  be  paid,  as  is  the  case  on  land,  ^"< , 
such  rent  has  no  influence  upon  price.  The  propriety  of  distinguishing  ca- 
pital from  labour  will  hereafter  be  treated  of. — E. 

Bishop  Berkley  entertained  very  just  opinions  respecting  the  source  of 
wealth.  In  his  Querist,  published  in  1735,  he  asks, — "  AVhether  it  were 
not  wrong  to  suppose  land  itself  to  be  wealth  ?  And  whether  the  ■indusln/ 
of  the  people  is  not  first  to  be  considered,  as  that  which  constitutes  wealtli. 
wdiich  makes  even  land  and  silver  to  be  wealth,  neither  of  which  wouKl 
have  any  value,  but  as  means  and  motives  to  industry  .' 

"  Whether,  in  tlie  wastes  of  America,  a  man  might  not  possess  twent} 
miles  square  of  land,  and  yet  want  his  dinner  or  a  coat  to  his  back." — Qwc- 
rist.  Numbers  38  and  39. 

We  shall  afterward  notice  Sir  William  Petty *s  opinion  on  this  subject. 
M.  Say  appears  to  think  (Discours  Prehminaire,  p.  37)  that  Galiani 
was  the  first  who  showed,  in  his  treatise  Delia  Moticla,  published  in  1750, 
that  labour  was  the  only  source  of  wealth.  But  the  passages  we  have  noAV 
laid  before  the  reader  prove  the  erroneousness  of  this  opinion.  Galiani  has 
entered  into  no  analysis  or  ars;y)ncnt  to  prove  the  correctness  of  his  slate - 
■ment ;  and,  as  it  appears  from  other  parts  of  his  work,  that  he  was  well 
acquainted  with  ftlr.  Locke's  Tracts  on  Money,  a  suspicion  naturally  arises 
that  he  had  seen  the  Essay  on  Civil  Government,  and  that  he  was  really 
indebted  to  it  for  a  knowledge  of  this  principle.  This  suspicion  derive- 
strength  from  the  circumstance  of  Galiani  .being  still  less  aware  than  Mr. 
Locke  of  the  value  of  the  discovery. — See  Trattato  Delia  Moneia,  p.  39. 
ediz.  1780. 

*  "  If  in  thought,"  says  Canard.  "  I  withdraw  from  my  watch  all  the 
labour  which  has  been  successively  applied  to  it,  there  will  only  remain  a 
few  grains  of  metal  placed  in  the  bowels  of  the  earth,  where  they  are  desti- 
tute of  value.  In  the  same  manner,  if  I  analyze  the  bread  which  I  eat,  and 
successively  separate  from  it  all  the  successive  labours  bestowed  upon  il, 
there  will  only  remain  some  stalks  of  grass  seeded,  scattered  through  un- 
cultivated deserts,  and  -vvilhont  value.'" — Privri-plfs  of  Politirnl  Eco- 
■nomy. —  E. 


Ob 


POLITICAL    ECONOMY. 


Labour  the  that  has  covered  the  earth  with  cities  and  the  ocean  with  ships — 
nf'wcaith"  ^^^^  ^^^  given  us  plenty,  comfort,  and  elegance,  instead  of  want, 
misery,  and  barbarism. 

Having  established  this  fundamental  principle — having  shown 
that  it  is  labour  only  that  gives  exchangeable  value  to  commodi- 
ties— it  is  plain  the  great  practical  problem  of  the  science  of 
Political  Economy  must  resolve  itself  into  a  discussion  of  the 
means  whereby  labour  may  be  rendered  most  efficient,  or 
whereby  the  greatest  amount  of  necessary,  useful,  and  agreeable 
prodiicts  may  he  obtained  with  the  least  quantity  of  labour. 
Wealth,  as  we  have  already  shown,  is  always  increased  with 
every  diminution  of  the  labour  required  to  produce  the  articles 
of  which  it  consists.  Every  measure  and  invention  that  has  any 
tendency  to  save  labour,  or  to  reduce  the  cost  of  producing 
commodities,  must  add  proportionably  to  our  power  of  obtaining 
wealth  and  riches,  while  every  measure  or  regulation  that  has 
any  tendency  to  waste  labour,  or  to  raise  the  cost  of  producing 
commodities,  must  equally  lessen  this  power.  This  is  the  sim- 
ple and  decisive  test  by  which  we  are  to  judge  of  the  expedien- 
cy of  ever3'^  measure  affecting  the  wealth  of  the  country,  and  of 
the  value  of  every  invention.  If  they  render  labour  more  pro- 
ductive— if  they  have  a  tendency  to  reduce  the  exchangeable 
value  of  commodities,  to  render  them  more  easily  obtainable, 
and  to  bring  them  within  the  command  of  a  greater  portion  of 
society,  they  must  be  advantageous  ;  but  if  their  tendency  be 
different,  they  must  as  certainly  be  disadvantageous.  Consider- 
ed in  this  point  of  view,  that  great  branch  of  the  science  of  Po- 
litical Economy  which  treats  of  the  production  of  wealth,  will 
be  found  to  be  abundantly  simple,  and  easily  understood. 

Labour,  according  as  it  is  applied  to  the  raising  of  raw  pro- 
duce— to  the  fashioning  of  that  raw  produce,  when  raised,  into 
articles  of  utility,  convenience,  or  ornament — and  to  the  con- 
veyance of  raw  and  wrought  produce  from  one  country  and 
place  to  another — is  said  to  be  agricultural,  manufacturing,  or 
commercial.  An  acquaintance  with  the  particular  processes, 
and  most  advantageous  methods,  of  applying  labour  in  each  of 
these  grand  departments  of  industry,  forms  the  peculiar  and  ap- 
propriate study  of  the  agriculturalist,  manufacturer,  and  mer- 
chant. It  is  not  consistent  with  the  object  of  the  political  eco- 
nomist to  enter  into  the  details  of  particular  businesses  and  pro- 
fessions. He  confines  himself  to  an  investigation  of  the  means 
by  which  labour  in  general  may  be  rendered  most  productive, 
and  how  its  powers  may  be  increased  in  all  the  departments  ot" 
industry. 

Sect.  H. — Means  by  which  the  Productive  Powers  of  Labour  arc 
increased — Security  of  Property — Division  of  Labour — Accu- 
■inulation  and  Employment  of  Capital. 


Meaysiiv  'Vho.  most  carcless  and  inattentive  observer  of  the  progress  of 

wiiich  thfi  maiikind  from  poverty  to  affluence  must  have  early  perceived, 
Powiirs  of  that  there  are  three  circumstances  whose  conjoint  operation  is 
Liibour  may  nccessary  to  stimulate  and  improve  the  productive  powers  of 


'  iiM'rcasfHl. 


industry,  and  in  the  absence  of  which  men  could  never  have 
emerged  from  barbarism.  The^rs^,  and  most  indispensable,  is 
the  srrnnty  of  property,  or  a  well  foimded  conviction  in  the  mind 


POLITICAL    ECONOMY,  67 

of  every  individual  that  he  will  be  allowed  to  dispose  at  plea-  Means  by 
sure  of  the  fruits  of  his  labour.     The  second  is  the  introduction  pr"auctiv'o 
of  exchange  or  barter,  and  the  consequent  appropriation  of  par-  l^^^l^^l^y 
ticular  individuals  to  particular  employments.     And  the  third  is  be  increaseii, 
the  accumulation  and  employment  of  the  produce  of  previous 
labour,  or,  as  it  is  more  commonly  termed,  of  capital,  or  stock. 
All  the  improvements  that  have  ever  been  made,  or  that  ever 
can  be  made,  in  the  great  art  of  producing  the  necessaries,  com- 
forts, and  conveniencies  of  human  life,  are  all  resolvable  into  the 
more  judicious  and  successful  application  of  one  or  more  of  those 
means  of  stimulating  labour,  and  adding  to  its  power.     To  give 
a  full  exposition  of  the  nature  and  influence  of  each  would  far 
exceed  the  limits  of  this  article  ;    and  we  must  content  ourselves 
with  such  observations  as  may  suffice  to  give  a  general  idea  of 
their  operation. 

Security  of  Property. — Security  of  property  is  the  first  Security  of 
and  most  indispensable  requisite  to  the  production  of  wealth,  ^'op^""^ 
Its  utility  in  this  respect  is,  indeed,  so  obvious  and  striking,  that 
it  has  been  more  or  less  respected  in  every  country,  and  in  the 
earliest  and  rudest  periods  of  society.  All  have  been  impressed 
with  the  reasonableness  of  the  maxim  which  teaches  that  those 
who  sow  ought  to  be  permitted  to  reap — that  the  labour  of  a 
man's  body  and  the  work  of  his  hands  are  to  be  considered  as 
exclusively  his  own.  No  savage  horde  has  ever  been  discover- 
ed in  which  the  princif>le  of  ineum  and  tuum  was  not  recognised. "^ 
Nothing,  it  is  plain,  could  ever  tempt  any  one  to  engage  in  any 
laborious  employment — he  would  neither  domesticate  wild  ani- 
mals, nor  clear  and  cultivate  the  ground,  if,  after  months  and 
years  of  toil,  when  his  flocks  had  become  numerous,  and  his 
harvests  were  ripening  for  the  sickle,  a  stranger  were  to  be  al- 
lowed to  rob  him  of  the  produce  of  his  industry.  No  wonder, 
therefore,  that  the  utility  of  some  general  regulations,  which 
should  secure  to  every  individual  the  peaceable  enjoyment  of 
the  produce  he  had  raised,  and  of  the  ground  he  had  cultivated 
and  improved,  suggested  itself  to  the  first  legislators.  The  au- 
thor of  the  book  of  Job  places  those  who  removed  their  neigh- 
bour's land-marks  at  the  head  of  his  list  of  wicked  men  ;  and 
some  of  the  earliest  profiine  legislators  subjected  those  who  were 
guilty  of  this  offence  to  a  capital  punishment.  (Goguet,  De  VOri- 
gine  des  Loix,  ^c.  Tom.  I.  p.  30.  4to.  ed.) 

Dr.  Paley  has  said  that  the  law  of  the  land  is  the  real  foun- 
dation of  the  right  of  property.     But  the  obvious  utility  of  se- 

*  Personal  property  is  much  earlier  recognised  than  that  of  land.  It 
seems  to  be  a  natural  prejudice,  slowly  overcome,  that  the  earth,  that 
"  common  mother  of  all,  belongs  equally  to  her  children,  and  is  not  capa- 
ble of  individual  appropriation.  Hence,  among  our  northern  Indians,  land, 
though  held  by  individuals,  is  the  property  of  the  nation  at  large.  The  in- 
security thus  attached  to  improvements  laid  out  upon  it,  may  be  considered 
as  one  of  the  greatest  barriers  to  their  civilization,  and  deserves  the  consi- 
deration of  those,  who,  from  political  or  benevolent  views,  are  devising 
schemes  for  their  advancement.  The  want  of  this  stimulus  among  them 
to  industry  and  accumulation,  was  repeatedly  acknowledged  to  the  Editor, 
in  a  recent  visit  made  by  liim  to  the  Oneida  and  Tuscarora  tribes,  by  their 
most  intelligent  Chiefs.  See  the  reported  speeches  of  Red  Jacket,  and 
other  leaders  of  the  heathen  party,  who  are  opposed  to  such  appropriation, 
and  whose  arguments  against  it  are  all  drawn,  as  our  author  argues,  froTrs 
the  advantasres  it  would  bestow  on  the  sober  and  industrious. — K. 


58  POLITICAL    ECONOMY. 

Security  of  curing  to  cach  individual  the  produce  which  has  been  raised  by 
Pfoportr.  j^jg  industry,  has  undoubtedly  formed  the  irresistible  reason 
u'hich  has  induced  every  people  emerging  from  barbarism  to 
establish  this  right.  The  institution  of  the  right  of  property  is. 
in  truth,  the  foundation  on  which  all  the  other  institutions  of 
society  rest.  Until  property  had  been  publicly  guaranteed, 
men  must  have  looked  on  each  other  as  enemies,  rather  than 
as  friends.  The  idle  and  improvident  are  alwaj's  desirous  of 
seizing  on  the  earnings  of  the  laborious  and  frugal ;  and,  if  they 
were  not  restrained  by  the  strong  arm  of  the  law — if  they  were 
permitted  to  prosecute  their  attacks,  they  would,  by  generating 
a  feeling  of  insecurity,  efl'ectu;diy  check  both  industry  and  ac- 
cumulation, and  sink  all  classes  to  the  same  level  of  hopeless 
jnisery  as  themselves.  In  truth,  the  security  of  property  is 
even  more  necessary  to  accumulation  than  it  is  to  production. 
No  man  ever  did  or  ever  will  deny  himself  an  immediate  grati- 
fication when  it  is  within  his  power,  unless  he  thinks,  that,  by 
doing  so,  he  has  a  fair  prospect  of  obtaining  a  greater  accession 
of  comforts  and  enjoyments,  or  of  avoiding  a  greater  evil  at 
some  future  period.  Where  the  right  of  property  is  vigilantly 
protected,  an  industrious  man,  who  produces  as  much  by  one 
(lay's  labour  as  is  sufficient  to  maintain  him  two  days,  does  not 
iie  idle  the  second  day,  but  accumulates  the  surplus  produce 
above  his  wants  as  a  capital  ;  the  increased  consequence  and 
enjoyments  which  the  possession  of  capital  brings  along  with  it, 
being,  in  the  great  majority  of  cases,  more  than  sufficient  to 
counterbalance  the  desire  of  immediate  gratitication.  But, 
wherever  property  is  insecure,  we  look  in  vain  for  the  opera- 
tion of  the  principle  of  accumulation.  "  It  is  plainly  better  for 
lis,"  is  then  the  invariable  language  of  the  people,  "  to  enjoy 
while  it  is  in  our  power,  than  to  accumulate  property  which  we 
shall  not  be  permitted  to  use,  and  which  will  either  expose  us 
to  the  extortion  of  a  rapacious  government,  or  to  the  unre- 
:-traincd  depredations  of  those  who  exist  only  by  the  plunder  of 
J  heir  more  industrious  neighbours." 

But  the  security  of  property  is  not  violated  merely  when  a 
man  is  deprived  of  the  power  of  peaceably  enjoying  the  fruits 
of  his  industry  ;  it  is  also  violated,  and  perhaps  in  a  still  more 
?i;laring  and  unjustifiable  manner,  when  he  is  prevented  from 
using  the  powers  with  which  nature  has  endowed  him,  in  any 
wav,  not  injurious  to  others,  that  he  considers  most  benefi- 
cial to  himself.  Of  all  the  species  of  property  which  a  man 
<:an  possess,  llie  faculties  of  his  mind  and  the  porcers  of  his  bodij 
are  most  particularly  his  own.  He  ought,  therefore,  to  be  per- 
mitted to  enjoy,  that  is,  to  use  or  exert  these  powers  at  his  dis- 
cretion. And  hence  the  right  of  property  is  as  much,  or  more 
infringed  upon,  when  a  man  is  interdicted  from  engaging  in  a 
particular  branch  of  business,  as  it  is  when  he  is  forcibly  bereft 
of  the  property  he  had  pro(hiced  and  accumulated.  Every  mo- 
nopoly which  gives  to  a  few  individuals  the  exclusive  power  of 
carrying  on  certain  branches  of  industry,  is  thus,  in  fact,  esta- 
blished in  direct  violation  of  the  right  of  property  of  every 
other  individual.  It  prevents  them  from  using  their  natural  ca- 
pacities or  powers  in  the  manner  which  they  might  have  consi- 
dered best  :  and.  as  every  man  who  is  not  a  slave  is  held,  anrl 


POLITICAL   ECONOMF.  59 

justly  held,  to  be  the  best,  and,  indeed,  the  only  judge  of  what  Sccufityof 
is  advantageous  for  himself,  the  principles  of  natural  law  and  '''^"P^'y- 
the  right  of  property  are  both  subverted  when  he  is  excluded 
from  any  employment.  In  like  manner,  the  right  of  property 
is  violated  whenever  any  regulation  is  made  to  force  an  indi- 
vidual to  employ  his  labour  or  capital  in  a  particular  way.  The 
property  of  a  landlord  is  violated  when  he  is  compelled  to  .idopt 
any  system  of  cultivation,  even  supposing  it  to  be  really  prefer- 
able to  that  which  he  was  previously  following.  The  property 
of  the  capitalist  is  violated  when  he  is  obliged  to  accept  a  par- 
ticular rate  of  interest  for  his  stock,*  and  the  property  of  the 
labourer  is  violated  whenever  he  is  obliged  to  betake  himself,  in 
preference,  to  any  particular  occupation. 

*  Among  tlie  many  instances  of  the  unwise  interference  of  governments 
in  the  regulation  of  private  concerns,  that  of  interest  deserves  peculiar  at- 
tention. It  is  one  of  those  omitted  subjects,  which,  though  elsewhere  treated 
by  the  author,  it  is  one  of  the  proposed  objects  of  these  notes  to  supply. 

Regidation  of  Interest. 

Interest  is  the  sum  paid  for  the  use  of  capital — money  is  but  its  inciden- 
tal and  transient  form — that  which  is  truly  borrowed,  is  circulating  capital 
under  any  of  its  varied  forms,  such  as  coin,  goods,  or  credit. 

The  rate  of  interest  may  be  considered  as  composed  of  two  elements — 

1 .  The  real  price  of  money, 

2.  The  premium  of  the  risk  that  arises  from  lending. 

1:  The  real  price  of  money  is  determined  by  the  profitable  application 
that  can  be  made  of  it ;  it  consequently  varies  with  the  state  of  the  market ; 
being  regulated,  as  all  market  prices  are,  by  the  opposing  principles  of  de- 
mand and  supply  :  the  demand  being  grounded  upon  the  profits  of  business 
or  speculation,  the  supply  upon  the  quantity  of  disposable  capital  thrown 
into  the  market.  The  high  rate  of  this  portion  of  interest  is  the  best 
proof  of  commercial  and  general  prosperity,  since  it  ai'ises  from  brisk  trade, 
extending  markets,  and  high  profits. 

2.  The  second  element  of  interest  is  of  a  difi'erent  character.  It  is  the 
premium  paid  to  the  lender  against  the  risk  of  delay  or  loss.  In  loans  to 
the  govornment  this  portion  of  interest  may  be  said  to  disappear,  and  tho 
rate  to  sink  to  its  first  portion,  or  the  real  value  of  money  grounded  upon 
its  use.  In  all  other  cases,  however,  this  premium  appears  and  proceeds 
from  the  smallest  item  up  to  an  unlimited  amount,  according  to  the  vary- 
ing grades  of  risk.  This,  therefore,  has  its  natural  and  fair  value  as  well 
as  the  former,  and  is  as  little  a  proper  subject  for  arbitrary  limitations. 

The  original  grounds  for  the  interference  of  government  on  this  subject 
were  two,  both  founded  upon  error. 

The  first  was  a  religious  prejudice  grounded  upon  a  bigoted  interpreta- 
tion of  a  municipal  provision  of  the  Jewish  code,  which  led  the  govern- 
ments of  Christendom,  not  to  regulate,  but  to  forbid  all  u^se  or  usury  (for 
the  terms  are  equivalent)  of  money  lent,  as  an  unchristian  practice,  and 
permissible  therefore  only  to  the  Jews.  This  prejudice  lost  its  hold  under 
the  influence  of  the  Reformation,  and  in  1546  interest  was  first  permitted 
in  Europe. 

The  second  is  a  prejudice  equally  unfounded,  but  of  more  scientific  pre- 
tensions. It  arose  from  the  fallacy  of  regarding  money  alone  as  wealtli. 
and  the  interest  of  money  as  so  much  extorted  from  the  earnings  of  the 
industrious.  Hence  the  holders  of  money  were  invidiously  regarded  as 
men  pursuing  their  own  interest  to  the  detriment  of  the  community.  The} 
were  therefore  to  be  restrained  in  the  exercise  of  the  influence  it  gave  them, 
the  public  was  to  be  saved  from  the  grasp  of  avarice,  and  the  poor  and  ig- 
norant to  be  protected  from  their  power. 

Sounder  views  now  prevail,  yfet  the  practical  errors  grounded  on  such 
misconceptions  are  still  supported  by  government,  and  laws  are  still  con- 
tinued in  force,  which,  under  the  plea  of  public  good,  check  the  free  circu- 
lation of  capital,  and  under  the  plea  of  benevolence  oppress  every  needy 
borrower.     The  argument  against  all  su<"h  attempts  on  the  part  of  go- 


60 


POLITICAL    ECOKOMV, 


Security  of 
Property. 

Effects  of 

Insecurity. 


The  finest  soil,  the  finest  climate,  and  the  finest  intellectual 
powers,  can  prevent  no  people  from  becoming  barbarous,  poor, 
and  miserable,  if  they  have  the  misfortune  to  be  subjected  to  a 
government  which  does  not  respect  the  right  of  property.  This 
is  the  greatest  of  ail  calamities.  The  ravages  of  civil  war,  of 
pestilence,  and  of  famine,  may  be  repaired  ;  but  nothing  can 
enable  a  nation  to  contend  against  the  deadly  influence  of  an 
established  system  of  violence  and  rapine.  It  is  the  want  of 
security — the  want  of  any  lively  and  well-founded  expectation 
of  being  permitted  freely  to  dispose  of  the  fruits  of  their  indus- 
try, that  is  the  principal  cause  of  the  wretched  state  of  the 
Ottoman  dominions  at  the  present  day,  as  it  was  of  the  decline 
of  industry  and  arts  in  Europe  during  the  middle  ages.  When 
the  Turkish  conquerors  overran  those  fertile  and  beautiful 
countries  in  which  they  are  still  permitted  to  encamp,  they  par- 
celled them  among  their  followers,  on  condition  of  their  per- 
forming certain  military  services,  on  a  plan  corresponding,  in 
many  important  particulars,  to  the  feudal  system  of  our  ances- 
tors.    But  these  possessions  are  not  hereditai'y.     They  do  not 

vernment,  to  limit  the  rate  of  interest,  may  be  reduced  to  these  four  con- 
siderations : — 

1.  The  futihty  of  such  laws  in  attaining  the  end  proposed. 

2.  Their  inexpediency  in  relation  to  public  prosperity. 

3.  Their  injustice  towards  the  holders  of  capital. 

4.  Their  oppressiveness  towards  the  needy  borrower. 

In  the  first  place  they  are  futile, — they  never  did  and  never  can  regu- 
late interest  of  capital,  which  is  governed  by  its  own  necessary  laws ;  and 
in  every  change  these  penal  statutes  have  undergone  in  lowering  the  rate 
of  interest,  they  have  followed  the  market,  and  not  governed  it. 

In  tlie  next  place  tliey  are  inexpedient, — they  delay  the  circulation  ot 
Capital  from  the  barriers  they  oppose  to  its  fair  investment,  and  in  so  doing 
check  one  of  the  elements  of  public  Avealth.  It  is  true  this  check  is  com- 
paratively trifling,  because  individual  cupidity  will  always  find  the  means 
of  evading  such  provisions,  but  in  so  far  as  they  do  operate,  it  is  alike  in 
the  injury  of  the  individual  and  the  disadvantage  of  the  public  ;  a  result 
which  is  only  to  be  avoided  by  one  still  more  to  be  tlrcaded — the  demo- 
ralizing influence  of  deceit  and  legal  fraud. 

In  tlie  third  place  they  are  unjust, — setting  limits  to  the  profits  of  capital 
in  one  form,  while  they  leave  it  free  in  every  other.  The  price  of  goods, 
of  rent,  and  of  labour,  are  all  left  free  to  fuid  their  ovm  natural  value,  while 
that  of  money  alone  is  arbitrarily  fixed  at  a  price,  sometimes  too  high,  some- 
times too  low,  and  right  and  equitable  only  by  chance. 

In  the  last  place,  they  are  oppressive  upon  the  very  class  of  men  whom 
they  profess  to  defend, — the  young,  the  ignorant,  and  the  needy  : — where- 
ever  the  risk  of  a  loan  exceeds  that  which  legal  interest  will  cover,  no  man 
will  lend ;  the  conscientious  retire  from  competition,  and  the  borrower,  quit- 
ting the  open  market,  is  left  in  the  hands  of  the  few,  and  comparatively, 
tmprincipled  lenders.  This  constitutes  their  business  a  monopoly ;  which, 
like  all  other  monopolies,  raises  the  price  of  that  which  it  supplies. 

A  more  definite  cause  of  advance,  is  the  new  risk  it  has  added  to  the 
loan, — that  of  the  loss  of  character,  and  of  the  legal  penalties  consequent 
on  discovery, — this  risk  requires  a  new  premium  of  insurance  to  be  added 
to  the  real  one,  and  may  be  confidently  asserted  to  be  a  gratuitous  and  un- 
necessary tax,  raised  upon  the  necessitous  borrower,  by  the  very  laws 
■C'hich  thus  unwisely  attempt  to  befriend  him. 

These  laws  should  therefore  be  abrogated.  In  every  case  where  a  con- 
tract is  entered  into,  the  parties  are  the  best  judges  of  the  value  of  mo- 
ney ;  and  in  those  accidental  cases  whefe  there  is  none,  the  decision  may 
be  made  under  a  provisional  law,  or  still  "more  equitably,  left  to  a  legal  or 
commercial  reference. 

On  this  subject,  see  .4dam  Smith,  B.  I.  ch.  ix.  B.  II.  ch.  iv.  Say,  B.  II. 
i;h.  viij.  sr>ct_.  1.     Ricardo.  Ch;'j>.  xxi.  xxvii. — K. 


l-OLITICAL    KCON'OAIV.  (j  J 

descend  to  the  children  or  legatees  of  the  present  possessor,  security  oi' 
but,  on  his  death,  revert  to  the  Sultan.  Among  the  occupiers  '''■"I'f'^"' 
of  land  in  Turkey  there  is,  therefore,  no  thought  of  futurity. 
No  one  can  feel  any  interest  about  the  prosperity  of  an  un- 
known successor ;  and  no  one  ever  executes  any  improvemeni 
of  which  he  does  not  expect  to  be  able  to  reap  all  the  advan- 
tage during  his  own  life.  This  is  assigned  by  Lady  Wortley 
Montague  as  the  cause  why  the  Turks  Sre  so  extremely  care- 
less about  their  houses.  They  never  construct  them  of  solid  or 
durable  materials.  And  it  would  be  a  gratification  to  them  to  be 
assured  that  they  would  fall  to  pieces  the  moment  after  they  had 
breathed  their  last.  Under  this  miserable  government  the  pa- 
laces have  been  changed  into  cottages,  and  the  cities  into  villa- 
ges. The  long  continued  want  of  security  has  extinguished  the 
very  spirit  of  industry,  and  destroyed  not  only  the  power,  but 
even  the  desire  to  emerge  from  barbarism. 

Had  it  been  possible  for  arbitrary  power  to  pi'ofit  by  the  les- 
sons of  experience,  it  must  long  since  have  perceived  that  its 
own  wealth,  as  well  as  the  wealth  of  its  subjects,  would  be  most 
effectually  promoted  by  maintaining  the  inviolability  of  pro- 
perty. Were  the  Turkish  government  to  establish  a  vigilant 
system  of  police — to  secure  to  each  individual  the  unrestricted 
power  of  disposing  of  the  fruits  of  his  labour — and  to  substitute 
a  regular  plan  of  taxation  in  the  place  of  the  present  odious 
system  of  extortion  and  tyranny,  industry  would  revive,  capital 
and  population  would  be  augmented,  and  moderate  duties,  im- 
posed on  a  few  articles  in  general  demand,  would  bring  a  much 
larger  sum  into  the  coff'erS*'of  the  treasury  than  all  that  is  now 
obtained  by  force  and  violence.  The  stated  public  burdens  to 
which  the  Turks  are  subjected  are  light  when  compared  with 
those  imposed  on  the  English,  the  Hollanders,  or  the  Fi'ench. 
'But  the  latter  know  that  when  they  have  paid  the  taxes  due  to 
government,  they  will  be  permitted  peaceably  to  enjoy  or  to 
accumulate  the  remainder  of  their  earnings ;  whereas  the  Turk 
has  no  security  but  that  the  next  moment  after  he  has  paid  his 
stated  contribution,  the  Pacha,  or  one  of  his  satellites,  may  strip 
him  of  every  additional  farthing  he  possesses  !  Security  is  the 
foundation — the  principal  element  in  every  well  digested  sj'stem 
of  finance.  When  maintained  inviolate,  it  enables  a  country  to 
support,  without  much  difficulty,  a  very  heavy  load  of  taxes  : 
but  where  there  is  no  security — where  property  is  a  prey  to 
rapine  and  spoliation — to  the  attacks  of  the  needy,  the  power- 
ful, or  the  profligate — the  smallest  burdens  are  justly  regarded 
as  oppressive,  and  uniformly  exceed  the  means  of  the  impove- 
rished and  spiritless  inhabitant. 

The  Jews  have  been  supposed  to  afford  an  instance  of  a  peo-  Caeeof  iiie 
pie,  whose  property  has  been  long  exposed  to  an  almost  unin-  ^®"^' 
terrupted  series  of  attacks,  and  who  have,  notwithstanding,  con- 
tinued to  be  rich  and  industrious.  But  when  rightly  examined, 
it  will  be  found  that  the  case  of  the  Jews  forms  no  exception  to 
the  general  rule.  The  absurd  prejudices  with  which  the  Jews 
have  been  almost  universally  regarded,  long  prevented  their 
acquiring  any  property  in  land,  and  have  excluded  them  from 
participating  in  the  benfits  derived  from  the  charitable  institu- 
tions of  the  different  countries  among  which  thev  are  scattered. 


G2  ruLlTICAL    ECONOMY. 

Security  of  Having,  therefore,  no  adventitious  support  on  which  lo  depend; 
Vfojn-riy.  jjj  j^j^g  event  of  their  becoming  infirm  or  destitute,  they  had  a 
})o\verful  additional  motive  to  save  and  accumulate  ;  and  being 
excluded  from  agriculture,  they  were  of  necessity  compelled  to 
addict  themselves,  in  preference,  to  commerce.  In  an  age  when 
Ihe  profession  of  a  merchant  was  generally  looked  upon  as  some- 
thing mean  and  sordid,  and.wjien,  of  course,  they  had  compara- 
tively little  competition,  they  must  have  made  considerable  pro- 
fits ;  but  these  have  been  very  greatly  exaggerated.*  It  was  na- 
tural that  those  who  were  indebted  to  the  Jews  should  represent 
their  gains  as  enormous  ;  for  this  inflamed  the  existing  prejudi- 
ces against  them,  and  afforded  a  miserable  pretext  for  defraud- 
ing them  of  their  just  claims.  There  are  a  few  rich  Jews  in 
most  of  the  large  cities  of  Europe  ;  but  the  majority  of  that  race 
have  ever  been,  and  still  are,  as  poor  as  their  neighbours. 

Let  us  not,  therefore,  deceive  ourselves  by  supposing  that  it 
is  possible  for  any  nation  or  any  people  to  emerge  from  barba- 
rism, or  to  become  wealthy,  populous,  and  civilized,  without 
the  security  of  property.     From  whatever  point  of  the  politi- 
cal compass  we  may  set  out,  this  is  the  principle  to  which  we 
must  come  at  last.     Security  is  indispensably  necessary  lo  the 
successful  exertion  of  the  powers  of  industry.      Where  it  is 
wanting,  it  is  idle  to  expect  either  riches  or  civilization.! 
Objections         Rousseau  and  some  other  sentimental  writers  have  made  an 
"ri^ouseeau  objcctiou  to  the  institution  of  the  right  of  property,  which  has 
m  founded"'' been,  in  some  measure,  sanctioned  by  the  authority  of  the  Mar- 
quis Beccaria.J     They  allow  that  the  security  of  property  is 

*  la  addition  to  the  soiu'ces  of  Wealth  enumerated  by  our  author  as  pe- 
culiar to  that  persecuted  people,  is  to  be  added,  that  monopoly  of  the  mo- 
nied  market,  which,  from  the  religious  prejudices  of  the  community,  was 
thrown  completely  into  their  hands.  They  alone  were  money  lenders,  as 
they  alone  were  permitted  to  derive  a  profit  from  its  use  ;  an  exclusive 
privilege  of  which  they  did  not  fail  to  take  the  full  advantage.  For  their 
state  in  England,  see  Hume,  reigns  of  Richard  I.  Appendix  II. ^  Henry  III., 
Edward  I.,  Hallam's  Middle  Ages,  Anderson's  Hist,  of  Commerce. — E. 

t  "  Ce  n'est  que  la  ou  les  proprietcs  sont  assui-^s,  ou  Temploi  des  capi- 
taux  est  abandoun^  au  choix  de  ceux  qui  les  possedent ;  ce  n'est  que  la 
dis-je,  que  les  particuliers  seront  encourages  a  se  soumettre  aux  privations 
les  plus  dures  pour  compenser  par  leurs  ^pargnes  les  retards  que  la  profu- 
sion du  gouvernement  peut  apporter  aux  progres  de  la  richesse  national. 
Si  I'Angleterre,  malgre  ses  guerres  ruineuses,  est  parvenu  a  un  haut  de- 
gre  d'opulence ;  si  malgre  les  contr»aitions  enormes  dont  le  peuple  y  est 
charge,  son  capital  est  pourtant  accrue  dans  le  silence  par  Teconomie  des 
particuliars,  il  ne  faut  attribuer  ces  effets  qu'a  la  liberie  des  personnes  et 
a  la  surete  des  proprietes  qui  y  regnent,  plus  que  dans  acun  autre  pays 
de  I'Europe,  la  Suisse  exceple."  (Storch,  Traitt  (fEcimomie  Politique^ 
Tom.  I.  p.  317.) 

"  It  is  only  where  properly  is  secure,  where  the  employment  of  capital 
is  left  free  to  its  possessors, — it  is  only  there  I  say,  that  individuals  will 
submit  to  those  privations,  which  make  up  by  private  savings,  for  that  de- 
Jay  which  the  profusion  of  government  may  impose  on  the  progress  of  na- 
tional wealth.  If  England,  notwithstanding  her  ruinous  wars,  has  arrived 
at  a  high  degree  of  opulence  ;  if,  notwitVistanding  the  enormous  contribu- 
tions with  which  her  people  are  loaded,  her  capital  has  still  silently  in- 
creased by  the  parsimony  of  individuals,  we  cannot  but  attribute  this  re- 
sult, to  that  personal  liberty  and  security  of  property,  which  reigns  there 

beyond  any  other  country  in  Euiope,    Switzerland  only  excepted." 

(Storch's  Treatise  on  Political  Economy.) — E. 

%  Speaking  of  theft,  Beccaria  calls  it,  "  II  delitto  di  quella  infelice  parte 
di  uomini,  a  cui  il  diritfo  di  proprieta  (terribile,  e  forse  non  nece^stirixt 


POLITICAL    ECONOMV.  (33 

advantageous  for  those  who  possess  it ;  but  they  contend,  that  it  security  of 
is  disadv^antageous  for  those  who  arc  poor  and  destitute.  It  has  ^"""['"'J- 
condemned,  they  affirm,  the  greater  portion  ot'  mankind  to  a 
state  of  misery,  and  has  provided  for  the  exaltation  of  the  few 
by  the  depression  of  the  many  !  The  sophistry  of  this  reason- 
ing is  so  apparent,  as  hardly  to  require  to  be  pointed  out.  The 
right  of  property  has  not  made  poverty,  but  it  has  made  oi'ea///;. 
Previous  to  the  institution  of  this  right,  those  nations  which  arc 
now  most  civilized,  were  sunk  to  the  same  level  of  wretched- 
ness and  misery  as  the  savages  of  New  Holland  and  Kamtschat- 
ska.  All  classes  have  been  benefited  by  this  change  ;  and  it  is 
mere  error  and  delusion  to  suppose  that  the  rich  have  been  be- 
nefited at  the  expense  of  the  poor.  The  institution  of  the-right 
of  property  gives  no  advantage  to  any  one  man  over  any  other 
man.  It  deals  out  justice  impartially  to  all.  It  does  not  say. 
labour,  and  I  will  i-eward  you  ;  but  it  says,  "  labour,  and  1  shall 
take  care  that  none  shall  be  permitted  to  rob  you  of  the  produce  of 
your  exertions.'"  The  institution  of  the  right  of  property  has 
not  made  all  men  rich,  because  it  could  not  make  all  men  Irugai 
and  industrious.  But  it  has  done  more  than  all  the  other  insti- 
tutions of  society  put  together  to  produce  this  effect.  It  is  not, 
as  it  has  been  sometimes  ignorantly  or  knavishly  represented,  a 
bulwark  thrown  up  to  protect  and  secure  the  property  of  a  few 
lavourites  of  fortune.  It  is  a  rampart  raised  by  society  against 
its  common  enemies — against  rapine  and  violence,  plunder  and 
oppression.  Without  its  protection  the  rich  man  would  become 
poor,  and  the  poor  man  would  never  be  able  to  become  rich — 
all  would  sink  to  the  same  bottomless  abyss  of  barbarism  and 
poverty.  "  It  is  the  security  of  property,''  to  use  the  just  and 
forcible  expressions  of  a  profound  writer,  "  that  has  overcome 
the  natural  aversion  of  man  to  labour,  that  has  given  him  the 
empire  of  the  earth,  that  has  given  him  a  fixed  and  permanent 
residence,  that  has  implanted  in  his  breast  the  love  of  his  coun- 
try and  of  posterity.  To  enjoy  immediately — to  enjoy  without 
labour,  is  the  natural  inclination  of  every  man.  This  inclina- 
tion must  be  restrained ;  for  its  obvious  tendency  is  to  arm  all 
those  who  have  nothing  against  those  who  have  something. 
The  law  which  restrains  this  inclination,  and  which  secures  to 
the  humblest  individual  the  quiet  enjoyment  of  the  fruits  of  his 
industry,  is  the  most  splendid  achievement  of  legislative  wisdom 
— the  noblest  triumph  of  which  humanity  has  to  boast." — (Ben- 
tham,  Traite  de  Legislation,  Tome  II.  p.  37.) 

diritlo,)  non  ha  lasciafo,  che  una  nuda  essistenza."' — Dei  Delitli  e  delU 
Pene,  \  22. 

"  The  crimes  of  that  wretched  portion  of  society,  unto  whom  the  right 
of  property,  (a  terrible  and  perhaps  an  unnecessary  right,)  has  left  nothing 
beyond  the  means  of  bare  existence." — (On  Crimes  and  Punishments.') 

The  Marquis  Beccaria  was,  in  point  of  time,  the  second  public  teach- 
er of  Political  Economy ;  having  been  appointed  to  the  chair  founded 
for  that  purpose,  in  the  University  of  Milan,  by  the  Empress  Maria  The- 
resa, in  1769.  His  only  predecessor  was  Genovesi,  in  the  University  of 
Naples,  1734. 

The  merits  of  Beccaria  as  a  writer  have  been  overrated  ;  he  was  a  be- 
nevolent man,  but  a  weak  reasoner.      Of  this  the  above  quotation  is  a 
proof.    For  tlie  apparent  injustice,  but  real  advantages  of  the  institution  of 
property,  see  Paley's  homely  but  forcible  illustrations  in  hi?  Mornl  Philo 
•sophy,  Book  II.  ch.  1,  2,  '3.—E. 


04  I-ULITICAL    KCONU.MV. 

nmsionot         Division  of  Labour.* — The  division  of  labour  uaturally  di- 
T.abour.        videi^  itself  into  two  separate  branches; — 1st.  The  division  of 
labour  among  individuals  ;  and  2d.  Its  division  among  nations. 

1.  Individual  Division  of  Labour. — The  division  of  labour 
can  oniy  be  imperfectly  introduced  in  rude  societies,  and  thinly 
peopled  countries.  But  in  every  state  of  society — in  the  rudest, 
;is  well  as  in  the  most  improved — w^e  can  trace  the  operation 
and  effects  of  this  principle.  The  various  physical  powers, 
talents,  and  propensities  with  which  men  are  endowed,  natu- 
rally tit  them  for  different  occupations  ;  and  a  regard  to  mutual 
interest  and  convenience  necessarily  leads  them,  at  a  very  early 
period,  to  establish  a  system  of  barter  and  a  separation  of  em- 
ployments. Each  individual  finds  that  he  can  obtain  a  greater 
(quantity  of  all  sorts  of  commodities  by  devoting  himself  to  some 
particular  business,  and  exchanging  his  surplus  produce  for  such 
parts  of  the  produce  of  other  people's  labour  as  he  may  have 
occasion  for  and  they  may  be  disposed  to  part  with,  than  if  he 
had  attempted  directly  to  produce  all  the  articles  which  he  con- 
sumes. As  society  advances,  this  division  becomes  more  and 
more  extended.  In  process  of  time,  one  man  becomes  a  tan- 
ner, or  dresser  of  skins  ;  another,  a  shoemaker ;  a  third,  a 
weaver  ;  a  fourth,  a  house  carpenter  ;  a  fifth,  a  smith,  and  so 
on.  Each  endeavours  to  cultivate  and  bring  to  perfection  what- 
ever talent  or  genius  he  may  possess  for  the  species  of  industry 
in  which  he  is  employed.  The  national  wealth  and  the  com- 
forts of  all  classes  are,  in  consequence,  prodigiously  augmented. 
In  a  country  where  the  division  of  labour  has  been  carried  to 
J  a  considerable  extent,  agriculturists  are  not  obhged  to  spend 

their  time  in  clumsy  attempts  to  manufacture  their  own  pro- 
duce ;  and  manufacturers  cease  to  interest  themselves  about  the 
raising  of  corn  and  the  fattening  of  cattle.  The  facility  of  ex- 
changing is  the  vivifying  principle  of  industry.  It  stimulates 
agriculturists  to  adopt  the  best  system  of  cultivation  and  to  raise 
ihe  largest  crops,  because  it  enables  them  to  exchange  whatever 
portion  of  the  produce  of  their  lands  exceeds  their  own  wants, 
for  other  commodities  conducing  to  their  comforts  and  enjoy- 
ments ;  and  it  equally  stimulates  manufacturers  and  merchants 
to  increase  the  quantity  and  to  improve  the  quality  of  their 
goods,  that  they  may  thereby  be  enabled  to  obtain  a  greater 
supply  of  raw  produce.  A  spirit  of  industry  is  thus  universally 
diffused  ;  and  that  apathy  and  languor,  which  is  characteristic  of 
a  rude  state  of  society,  entirely  disappear. 

But  it  is  not  the  mere  facihty  of  exchanging,  or  the  circum- 
stance of  being  able  to  barter  the  surplus  produce  of  one's  own 
labour  for  such  parts  of  the  surplus  produce  of  other  people's 
labour,  as  we  may  be  desirous  of  obtaining  and  they  may  choose 
to  part  with,  that  renders  the  separation  of  employments  of 
such  signal  advantage.  The  introduction  of  barter  and  the  di- 
vision of  labour  not  only  enables  each  individual  to  betake  him- 

'*  The  best  illuslratioti  of  this  subject,  will  be  found  in  tracing  the  ac- 
tual progress  of  society  from  its  earlier  stages  ;  and  is  strikingly  evinced  in 
the  rapid  changes  which  our  own  is  actually  undergoing.  Individual  gain 
is  the  motive,  national  Avealth  is  the  result.  For  further  views  on  this  sub- 
ject the  student  may  consult.  A.  Smith.  Book  I.  chap.  1.2.,  Say.  Book  I. 
'--hap.  fi.—E. 


PGLITICAL    liCONOMV.  iid 

self  in  pretereiice  to  those  departments  which  suit  his  taste  and  Division  of 
disposition,  but  it  makes  a  positive  and  a  large  addition  to  the  ^'^''°"'- 
efficacy  of  his  powers,  and  emibles  him  to  produce  a  much 
greater  quantity  of  commodities  than  he  could  have  done  had  he 
engaged  indiscriminatel}^  in  different  employments.  Dr.  Smith, 
who  has  treated  this  subject  in  the  most  masterly  mantier,  has 
classed  the  circumstances  which  conspire  to  increase  the  pro- 
ductive powers  of  industry,  when  labour  is  divided,  under  the 
following  heads  : — First,  To  the  increase  of  the  skill  and  dex- 
terity of  every  particular  workman  ;  second,  to  the  saving  of 
time,  which  is  commonly  lost  in  passing  from  one  particular 
employment  to  another  ;  and,  tlnrcl,  to  the  circumstance  of  the 
division  of  employments  having  a  tendency  to  facilitate  the  in- 
vention of  machines  and  of  processes  for  abridging  and  saving 
labour.  We  shall  make  a  few  observations  on  each  of  these 
heads. 

1st.  Respecting  the  improvement  of  the  skill  and  dexterity  of  Dmsiou  oi 
the  labourer,  it  is  sufficiently  plain  that  when  a  person's  whole  J'reas"s  ihR 
attention  is  devoted  to  one  branch  of  business,  when  all  the  skiii  and 
energies  of  his  mind  and  the  powers  of  his  body  are  made  to  theNvirk" 
converge,  as  it  were,  to  a  single  point,  he  must  attain  to  a  de-  '"^"• 
gree  of  proficiency  in  that  particular  branch,  to  which  no  indi- 
vidual engaged  in  a  variety  of  occupations  can  be  expected  to 
reach.  A  peculiar  play  of  the  muscles,  or  sleight  of  hand,  is 
necessary  to  perform  the  simplest  operation  in  the  best  and 
most  expeditious  manner ;  and  this  can  only  be  acquired  by 
habitual  and  constant  practice.  Dr.  Smith  has  given  a  striking 
example,  in  the  case  of  the  nail  manufacturer,  of  the  extreme 
difference  between  training  a  workman  to  the  precise  occupa- 
tion in  which  he  is  to  be  employed,  and  training  him  to  a  simi- 
lar and  closely  allied  occupation.  "  A  common  smith,"  says  he, 
"who,  though  accustomed  to  handle  the  hammer,  has  never 
been  used  to  make  nails,  if,  upon  some  particular  occasion,  he 
is  obliged  to  attempt  it,  will  scarce,  I  am  assured,  be  able  to 
make  above  two  or  three  hundred  nails  in  a  day,  and  those  ver}' 
bad  ones.  A  smith  who  has  been  accustomed  to  make  nails, 
but  whose  sole  or  principal  business  has  not  been  that  of  a 
nailer,  can  seldom,  with  his  utmost  diligence,  make  more  than 
eight  hundred  or  a  thousand  nails  in  a  day.  But  I  have  seen 
several  boys  under  twenty  years  of  age,  who  hail  never  exer- 
cised any  other  trade  but  that  of  making  nads,  who,  when  they 
exerted  themselves,  could  make,  each  of  them,  upwards  of  tn^o 
thousand  three  hundred  nails  in  a  day ;''''  or  nearly  three  times 
the  number  of  the  smith  who  had  been  accustomed  to  make 
them,  but  who  was  not  entirely  devoted  to  that  particular  bu- 
siness ! 

2d.  The  effect  of  the  division  of  labour  in  preventing  that  Saves  time: 
rsaste  of  time  in  moving  from  one  employment  to  another,  which 
must  always  take  place  when  an  individual  is  engaged  in  differ- 
ent occupations,  is  even  more  obvious  than  the  advantage  deri- 
ved from  the  improvement  of  the  skill  and  dexterity  of  the  la- 
bourer. When  the  same  individual  carries  on  different  employ- 
ments, in  different  and  perhaps  distant  places,  and  with  different. 
sets  of  tools,  it  is  plainly  impossible  he  can  avoid  losing  a  consi- 
dprable  portion  of  time  in  passing  between  them.    If  the  differ- 


66  POLITICAL    ECONOMV. 

Division  oi'    ent  businesses  in  which  a  labourer  is  to  be  engaged  could  be 
Labour.        carried  on  in  the  same  workshop,  the  loss  of  time  would  be 
less,  but  even  in  that  case  it  would  be  considerable.    "  A  man," 
as  Dr.  Smith  has  justly  observed,  '•  commonly  saunters  a  little 
in  changing  iVoni  one  business  to  another.    When  he  tirst  begins 
his  wofk,  he  is  seldom  keen  or  hearty ;  his  mind  is  said  not  to 
go  along  with  it,  and  for  some  time  he  rather  tritles  than  applies 
himself  in  good  earnest.     The  habit  of  sauntering  and  of  indo- 
lent and  careless  application,  which  is  naturally,  or  rather  ne- 
cessarily acquired  by  every  country  workman,  who  is  obliged 
to  change  his  work  and  his  tools  every  half  hour,  and  to  apply 
his  hand  in  working  different  ways  almost  every  day  of  his  life, 
renders  him  almost  always  slothful  and  lazy,  and  incapable  of 
any  rigorous  application,  even  on  the  most  pressing  occasion. 
Independent,  therefore,  of  his  deficiency  in  point  of  dexterity, 
this  cause  alone  must  always  reduce  considerably  the  quantity 
of  work  which  he  is  capable  of  performing." — [Wealth  of  A''a- 
lioiis.  Vol.  1.  p.  14.)** 
iviuiafes         3d.  With  regard  to  the  effect  of  the  division  of  employments 
ti'lTn'of  Ma-    in  facilltaiing  the  invention  of  machines,  and  processes  for  abridg- 
ohinos.         {j^g  (ifi^i  saving  labour,  it  is  obvious  that  those  engaged  in  any 
branch  of  industry,  must  be  more  likely  to  discover  easier  and 
readier  methods  for  carrying  it  on,  when  the  whole  attention  of 
their  minds  is  devoted  exclusively  to  it,  than  if  it  were  dissipa- 
ted among  a  variety  of  objects.     But  it  is  a  mistake  to  suppose, 
as  has  been  sometimes  done,  that  it  is  only  the  inventive  genius 
of  workmen  and  artificers  that  is  whetted  and  and  improved  by 
the  division  of  labour.     As  society  advances,  the  study  of  par- 
licular  branches  of  science  and  of  philosophy  becomes  the  prin- 
cipal  or  sole  occupation  of  the  most  ingenious  men.    Chemistry 
becomes  a  distinct  science  from  natural  philosophy ;  the  phy- 
sical astronomer  separates  himself  from  the  astronomical  obser- 
ver, the  political  economist  from  the  politician,  and  each  medi- 
tating exclusively,  or  principally,  on  his  peculiar  department  of 
science,  attains  to  a  degree  of  proficiency  and  expertness  in  it 
to  which  the  general  scholar  seldom  or  never  reaches.     And 
hence,  in  labouring  to  promote  our  own  ends,  we  all  necessarily 
adopt  that  precise  course  which  is  most  advantageous  to  all. 
Like  the  difierent  parts  of  a  well  constructed  engine,  the  inha- 
bitants of  a  civilized  country  are  all  mutually  dependant  on,  and 
connected  with,  each  other.    Without  any  previous  concert,  and 
obeying  only  the  powerful  and  steady  impulse  of  self-interest, 
they  universally  conspire  to  the  same  great  end,  and  contribute 

*  Of  the  power  of  labour  and  its  subdivisions,  Adam  Smith  may  be 
considered  the  great  and  able  eulogist.  The  immense  superiority  of  mo- 
dern over  ancient  times,  in  wealth  and  comfort,  he  attributes  principally 
to  this  cause. 

Lauderdale,  again,  explains  it  liy  the  accumulation  of  capital.  • 
And  Say,  by  the  greater  natural  agents  which  man  has  forced  into  his 
service,  and  made  to  labour  for  his  benefit,  the  wind,  the  water,  and  the 
steam,  which  science  has  subjected  to  his  power.  As  an  instance  of  the 
immense  diminution  of  the  cost  of  production,  and  consequent  accumula- 
tion of  wealth,  he  instances  the  labour  requisite  to  suppjy  a  single  family 
in  earlier  times  with  bread  ;  tAvelvc  slaves  being  described  by  Homer,  as 
constantly  engaged  in  grinding  grain  for  the  household  of  Ulysscs.^Odys- 
sey,  L.  XX.  Compare  with  this,  the  labour  of  a  single  individual,  directing 
the  powers  of  a  steam  engine  to  the  same  result. — Say,  B.  I.  ch.  vii. — E. 


i'OLlTlCAL    K(.ON'OAlV.  t)7 

lacli  in  tlieir  respective  sphere  to  furnish  the  greatest  possible  niiision  pC 
supply  of  necessaries,  luxuries,  convenicncies,  and  enjoyments.  ^'''^^""'^' 

But  it  is  necessary  to  observe,  thsrt  the  advantages  derived  nivUion  or 
from  the  division  of  labour,  though  they  may  be,  and  in  fact  miu'dby tiio 
are,  partially  enjoyed  in  every  country  and  state  of  society,  j^^'ri^'I,"'^"'" 
can  only  be  cari"ied  to  their  full  extent,  where  there  is  a  great 
power  of  exchanging,  or  an  extensive  market.  There  are  an 
infinite  variety  of  employments  which  cannot  be  separately  car- 
ried on  out  of  the  precincts  of  a  large  city  ;  and,  in  all  cases, 
the  division  becomes  just  so  much  the  more  perfect,  according 
as  the  demand  for  the  produce  of  the  workmen  is  extended.  It 
is  stated  by  Dr.  Smith,  that  ten  labourers  employed  in  diflerent 
departments  in  a  pin  manui'actory  can  produce  48,OOU  pins  a 
day  ;  but  it  is  evident  that  if  the  demand  was  not  sutficiently 
extensive  to  take  off  this  quantity,  it  would  be  impossible  to 
carry  the  division  so  far.  The  same  principle  holds  good  in 
every  case.  A  cotton  mill  could  not  be  constructed  in  a  small 
country  which  had  no  intercourse  with  its  neighbours.  The 
demand  and  competition  of  Europe  and  America  has  been  ne- 
cessary to  carry  the  manufactures  of  Glasgow,  Manchester,  and 
Birmingham,  to  their  present  state  of  improvement. 

The  effects  of  the  division  of  labour  in  increasing  the  quan- 
tity and  perfection  of  the  products  of  industry  have  been  noti- 
fied by  several  of  the  writers  who  preceded  Dr.  Smith,  and  es- 
pecially by  Mr.  Harris  and  M.  Turgot.  But  neither  of  these 
ivriters  have  done  what  Dr.  Smith  did.  None  of  them  have 
fully  analysed  and  exhibited  its  various  effects ;  and  none  of  them 
Jiave  shown  that  the  power  of  engaging  in  different  employments 
depended  on  the  porvcr  of  exchanging ;  and  that,  consequently, 
the  advantages  derived  from  the  division  of  labour  were  neces- 
sarily dependant  on,  and  regulated  by,  the  extent  of  the  market. 
This  is  a  principle  of  very  great  importance,  and  by  establish- 
ing it  Dr.  Smith  shed  a  new  light  on  the  whole  science,  and  laid 
the  foundation  of  many  important  practical  conclusions.  "  Pn;- 
sent^e  de  cette  maniere,"  says  M.  Storch,  "  I'idee  de  la  division 
du  travail  t'toit  absolument  neuve  ;  et  I'effet  qu'elle  a  fait  sur  les 
contemporains  de  Smith,  prouve  bien  qu'elle  Petoit  reellement 
pour  eux.  Telle  qu'elle  se  trouve  indiquee  dans  les  passages 
que  je  viens  de  citer,  elle  n'a  fait  aucune  impression.  Develop- 
pee  par  Smith,  cette  idee  a  d'abord  saisi  tous  ses  lecteurs  ;  tous 
en  ont  senti  la  verite  et  I'importance  ;  et  cela  suffit  pour  lui  en 
assurer  tout  I'honneur,  lors  meme  que  son  genie  ait  ete  guide 
par  les  indications  de  ses  devanciers." — (Tome  VI.  p.  10.) 

*  "  Presented  in  this  liglit,  the  idea  of  the  subdivision  of  labour  -was 
altogether  new,  and  the  effect  it  produced  upon  Smith's  contenijioraries, 
proves  that  it  was  really  so  to  them.  Such  as  it  appears  in  the  passages  I 
have  just  cited,  (from  preceding  writers,)  it  produced  no  impression  :  de- 
veloped by  Smith,  it  at  once  seized  the  minds  of  his  readers.  All  felt  its? 
truth  and  imi)ortance,  and  that  is  sufficient  to  secure  to  him  the  honour  of 
the  discovery,  oven  admitting  tliat  he  may  have  been  guided  by  the  indica- 
tions afforded  of  it  by  his  predecessors. — (Storch,  \'ol.  VI.  p.  10.) 

The  work  of  this  author,  who  is  as  yet  but  little  known  in  this  country, 
is  entitled,  "  Cours  d'Economie  Politique,"  and  was  published  in  Peters- 
burgh,  1815,  under  the  especial  patronage  of  Alexander.  It  appears  in 
the  foi-m  of  lectures,  for  the  Grand  Dukes  Nicholas  and  Michael;  and  ac- 
cording to  the  opinion  of  our  author,  elsewhere  expressed,  stands  "  at  the- 


t>8  POLITICAL    ECONOMV. 

Tcrritorici  '2,  Ttrfitoriul  Division  of  Labour,  or  Commerce. — Beside* 
f.ahum.  "^  tliat  sort  of  tlivisioti  of  labour  which  enables  each  individual  in 
a  limited  society  to  confine  himself  to  a  particular  employment, 
there  is  another  and  most  important  branch  of  the  division  oi' 
labour,  which  not  only  enables  particular  individuals,  but  the 
inhabitants  of  entire  districts,  and  even  nations,  to  addict  them- 
selves in  preference  to  certain  branches  of  industry.  It  is  ou 
this  territorial  division  of  labour,  if  we  may  so  term  it,  that  the 
commerce  which  is  carried  on  between  different  districts  of  the 
same  country,  and  between  different  countries,  is  founded.  The 
various  soils,  climates,  arid  capacities  of  production,  of  different 
districts  of  an  extensive  country,  tit  them  for  being  appropi'iated 
in  preference  to  certain  species  of  industry.  A  district  where 
coal  is  abundant,  which  has  an  easy  access  to  the  ocean,  and  a 
considerable  command  of  internal  navigation,  is  the  natural  seat 
of  manufiictures.  Wheat  and  other  species  of  grain  are  the 
proper  products  of  rich  arable  soils  ;  and  cattle,  after  being 
reared  in  mountainous  districts,  are  most  advantageously  fat- 
tened in  meadow  and  low  grounds.  Nothing  is  more  obvious, 
than  that  the  inhabitants  of  these  different  districts,  by  sepa- 
rately confining  themselves  to  the  particular  branches  of  indus- 
try for  the  successful  prosecution  of  which  they  have  some  pe- 
culiar natural  capabilinj,  must  produce  an  infinitely  greater 
quantity  of  useful  and  agreeable  commodities  than  they  could 
do  were  they  to  devote  their  labour  indiscriminately  to  every 
different  employment.  It  is  impossible  to  doubt  that  vastly 
more  manufactured  goods,  more  corn,  and  more  cattle,  are  pro- 
duced by  the  inhabitants  of  Glasgow,  of  the  Carse  of  Govvrie, 
and  of  Argyleshire,  respectively  confining  themselves  to  manu- 
factures, agriculture,  and  the  rearing  of  cattle,  than  if  each 
endeavoured  directly  to  supply  themselves  with  all  these  vari- 
ous products,  without  the  intervention  of  an  exchange. 

But  it  is  easy  to  see  that  foreign  trade,  or  the  territorial  divi- 
sion of  labour  between  different  and  independent  countries,  will 
contribute  to  increase  the  wealth  of  each  in  precisely  the  same 
manner  that  the  trade  between  different  provinces  of  the  same 
kingdom  contributes  to  increase  their  wealth.  There  is  a  still 
greater  difference  between  the  productive  powers  wherewith 
nature  has  endowed  different  and  distant  countries  than  there  is 
between  the  productive  powers  of  the  provinces  of  the  same 
country.  The  establishment  of  a  free  intercourse  between  them 
must,  therefore,  be  proportionably  advantageous.  It  would  evi- 
dently cost  an  infinitely  greater  expense  to  raise  the  wines  of 

head  of  all  the  works  on  Political  Economy  ever  imported  from  tlie  conti- 
nent into  England." 

The  merits  of  Adam  Smith  on  the  score  of  originality,  have  been  often, 
though  vainly,  contested ;  it  lies,  not  in  scattered  thoughts,  but  in  the 
union  of  tlie  whole,  in  that  grasp  of  mind  which  could  embody  into  one  har- 
monious system,  the  jarring  elements  of  reasoning  and  fact,  which  lay  scat-  . 
tcred  through  the  writings  of  his  predecessors.  Among  the  claimants  to 
the  honour  of  having  led  the  way  in  this  particular  point,  is  Beccaria,  who 
wrote  in  1769.  The  principles  of  Smith,  however,  were  formed  and  taught 
Ijy  him  many  years  before  they  were  published.  He  began  to  teach  them 
to  his  class  in  the  University  at  (llasgow,  as  early  as  the  year  1752.  For 
extracts  from  Beccaria,  see  Say,  B.  I.  ch.  8.  For  the  defence  of  the  origi- 
nality of  Smith,  see  Dugald  Stewart's  Memoir  of  Adam  Smith,  read  be- 
fore the  Royal  Society,  Edinburgh,  1793. — E. 


POLITICAL   ECONOMT.  G9 

France  or  Spain  in  England,  than  it  would  do  to  make  \  ork- Territorial 
shire  yield  the  same  products  as  Devonshire.  Indeed,  there  LaC""°' 
are  a  multitude  of  products,  and  some  of  them  of  the  very 
greatest  utility,  which  cannot  possibly  be  raised  except  in  par- 
ticular situations.  Were  it  not  for  commercial  intercourse,  we 
should  not  be  able  to  obtain  the  smallest  supply  of  tea,  sugar, 
raw  cotton,  raw  silk,  gold  bullion,  and  a  thousand  other  equally 
useful  and  valuable  commoillties.  Providence,  by  giving  differ- 
ent soils,  climates,  and  natural  productions  to  different  coun- 
tries, has  evidently  provided  for  their  mutual  intercourse  and 
civilization.  By  permitting  the  people  of  each  to  employ  their 
capital  and  labour  in  those  departments  in  which  their  geogra- 
phical situation,  the  physical  capacities  of  their  soil,  their  na- 
tional character  and  habits  fit  them  to  excel,  foreign  commerce 
has  a  wonderful  effect  in  multiplying  the  productions  of  art  and 
industry.  When  the  freedom  of  commerce  is  not  restricted, 
each  country  necessarily  devotes  itself  to  such  employments 
as  are  most  beneficial  to  each.  This  pursuit  of  individual  ad- 
vantage is  admirably  connected  with  the  good  of  the  whole. 
By  stimulating  industry,  by  rewarding  ingenuity,  and  by  using 
most  efficaciously  the  particular  powers  bestowed  by  nature, 
commerce  distributes  labour  most  effectively  and  most  econo- 
mically ;  while,  by  increasing  the  general  mass  of  necessary 
and  useful  products,  it  diffuses  general  opulence,  and  binds  to- 
gether the  universal  society  of  nations  by  the  common  and  pow- 
erful ties  of  mutual  interest  and  reciprocal  obligation.  Com- 
merce has  enabled  each  particular  state  to  profit  by  the  inven- 
tions and  discoveries  of  every  other  state.  It  has  given  us  new 
tastes  and  new  appetites,  and  it  has  also  given  us  the  means  and 
the  desire  of  gratifying  them.  The  progress  of  domestic  in- 
dustry has  been  accelerated  by  the  competition  of  foreigners. 
Commerce  has  either  entirely  removed,  or  greatly  weakened, 
a  host  of  the  most  unworthy  prejudices.  It  has  shown,  that 
nothing  can  be  more  illiberal,  irrational,  and  absurd,  than  that 
dread  of  the  progress  of  others  in  wealth  and  civilization  that 
was  once  so  prevalent ;  and  it  has  shown  that  the  true  glory 
and  real  interest  of  each  particular  people  will  be  more  cer- 
tainly advanced  by  emulating  and  outstripping  each  other  in 
the  career  of  science  and  civilization,  than  by  labouring  to  at- 
tain a  barren  pre-eminence  in  the  bloody  and  destructive  art 
of  war.* 

*  That  science  and  relig^ion  eventually  teach  the  same  lesson,  is  a  neces- 
sary consequence  of  the  unity  of  truth,  but  ft  is  seldom  that  this  union  is 
so  early  and  satisfactorily  displayed  as  in  the  researches  of  Political  Econo- 
my. In  ruder  ages  they  were  esteemed  altogether  at  variance.  Wealth 
and  virtue  were  in  opposite  scales,  and  rapine  was  the  surest  road  to  riches. 
In  the  imperfect  developments  of  the  science,  which  preceded  the  modern 
school,  by  which  it  appeared  that  national  or  individual  aggi"andizement 
was  counterbalanced  by  a  correspondent  diminution  on  the  part  of  others, 
Political  Economy  was  a  study  which  a  good  man  must  have  pursued  wth 
pain,  and  practised  with  some  feelings  of  remorse.  But  modern  science 
shows  a  fairer  picture, — the  beauteous  and  harmonious  union  of  public 
virtue  and  public  wealth,  of  peace  and  benevolence  uniting  nations  by  the 
bonds  of  mutual  interest,  and  national  prosperity  the  result  of  all  those  in- 
ternal and  external  regulations,  which  a  good  man  would  desire  for  their 
own  sake,  and  a  religious  man  choose  on  the  score  of  dniy  and  ii^ii. 
science. — E. 

O 


70 


PULITICAL    ECONOMVi 


Territorial 
Division  of 
Labour. 

Effect  of  tlie 

Territorial 

Division  of 

Ijftbour  in 

Augmenting 

National 

AVcalth. 


-Sophism  of 
tlie  French 
Economists 
on  the  Sub- 
ject of  Com- 
merce. 


The  inrluence  of  commerce  in  giving  increased  efficacy  lo  la- 
bour,  and  augmenting  national  wealth,  may  be  easily  illustrated. 
Thus,  in  the  case  of  the  intercourse,  or  territorial  division  of 
labour,*  carried  on  between  England  and  Portugal,  it  is  plain 
that  the  superiority  of  the  wool  of  England,  our  command  of 
coals,  of  skilful  workmen,  of  improved  machinery,  and  of  all 
the  instruments  of  manufacturing  industry,  enables  us  to  pro- 
duce cloth  at  a  much  cheaper  rate  than  the  Portuguese  :  but,  on 
(he  other  hand,  the  soil  and  climate  of  Portugal  being  peculiarly 
favourable  for  the  cultivation  and  growth  of  the  grape,  she  is 
enabled  to  produce  wine  at  an  infinitely  cheaper  rate  than  it  can 
be  produced  here.  And  hence  it  is  obvious,  that  England,  by 
t-onfining  herself  to  the  manufacture  of  cloth,  in  which  she  has 
a  natural  advantage  on  her  side,  and  exchanging  it  with  the  Por- 
tuguese for  wine,  will  obtain  a  vastly  larger  supply  of  that  com- 
modity than  if  she  had  attempted  to  cultivate  the  grape  at  home : 
and  Portugal,  by  exchanging  her  wine  for  the  cloth  of  England, 
will,  on  her  part,  obtain  a  much  greater  quantity  of  cloth  than 
if  she  had  attempted  to  counteract  the  intention  of  nature,  by 
converting  a  portion  of  her  capital  and  industry  from  the  raising 
of  wine,  in  which  she  has  an  advantage,  to  the  manufacture  of 
cloth,  in  which  the  advantage  is  on  the  side  of  another. 

What  we  have  already  stated  is  sufficient  to  expose  the  soph- 
ism involved  in  the  reasoning  of  the  French  economists,  who 
contended,  that  as  an  equivalent  must  be  always  given  for  such 
commodities  as  are  obtained  from  foreigners,  it  is  impossible  fo- 
reign commerce  can  ever  become  a  means  of  increasing  wealth. 
How,  they  asked,  can  the  wealth  of  a  country  be  increased  by 
o-iving  equal  values  for  equal  values  ?  They  admitted,  that  com- 
merce might  be  the  means  of  making  a  better  distribution  of  the 
wealth  of  the  world  ;  but  as  it  did  nothing  more  than  exchange 
one  sort  of  wealth  for  another,  they  denied  that  it  could  ever 
make  any  addition  to  that  wealth.  At  first  sight,  this  sophistical 
and  delusive  statement  appears  sufficiently  conclusive  ;  but  a 
very  few  words  will  be  sufficient  to  demonstrate  its  fallacy. 
The  advantage  of  commerce  does  not  consist  in  its  enabling 
either  of  the  parties  who  carry  it  on  to  obtain  commodities  of 
greater  value  than  those  they  give  in  exchange  for  them.  It 
may  have  cost  as  much,  or  more,  to  produce  the  cloth  where- 
Avith  the  Enghsh  merchant  purchases  the  wine  of  Portugal,  as 
it  did  to  produce  the  latter.  But  then,  it  must  be  observed,  that 
in  making  the  exchange,  the  value  of  the  wine  is  estimated  by 
"ichat  it  takes  to  produce  it  in  Portugal,  which  has  peculiar  nutu- 


*  Though  science  consists  not  in  terms  but  in  truth,  yet  the  introduciion 
.)f  a  scientific  term  is  often  found  to  give  clearness  and  precision  to  subjects 
before  obscure.  Thus  the  phrase  "  territorial  division  of  labour,"  as  ap- 
plied to  nations,  has  brought  that  subject  under  analogies  before  \xnper- 
«;eived,  and  rendered  more  undeniable  that  inference  so  important,  yet  sc 
slowly  acknowledged,  that  in  tlie  great  family  of  mankind,  nations  are  as 
individuals,  and  the  mass  of  general  wealth  is  increased  in  the  one  case,  as 
in  the  other,  by  a  subdivision  of  employment,  grounded  on  their  peculiar 
Jacilities  of  production.  This  argument  our  author  here  states  so  fairly 
and  conclusively,  that  nothing  need  be  added  beyond  the  references  he  has 
given.  As  the  work  of  Say,  however,  is  more  easy  of  access  than  most  of 
those  referred  to,  at  least  to  the  American  reader,  it  may  be  mentioned  that 
the  subject  will  there  be  found.  See  Introduction;  also.  Book  I.  eh.  ii.— ^. 


POLITICAL   ECONOMY.  71 

ral  capabilities  for  that  species  of  industry,  and  not  by  what  it  T«mtoiiai 
would  take  to  produce  it  in  England  were  the  trade  put  an  end  "'hol°"  "' 
to  ;  and,  in  like  manner,  the  value  of  the  cloth  is  estimated  by 
what  it  takes  to  produce  it  in  England,  and  not  by  what  it  would 
cost  to  produce  it  in  Portugal.  The  advantage  of  the  intercourse 
between  the  two  countries  consists  in  this,  that  it  enables  each 
of  them  to  obtain  commodities,  for  the  production  of  which  they 
have  no  natural  capabilit}^  and  which  it  would,  therefore,  cost 
a  comparatively  large  sum  to  produce  directly  at  home  at  the 
price  which  it  costs  to  produce  them  in  the  most  favourable  cir- 
cumstances, and  with  the  least  possible  expense.  The  gain  of 
the  one  party  is  not  the  loss  of  the  other.  Both  of  them  arc 
benefited  by  this  intercourse.  For  both  of  them  are  thereby 
enabled  to  save  labour  and  expense  in  the  production  of  com- 
modities ;  and  the  wealth  of  the  two  countries  is  not  only  better 
distributed,  but  it  is  also  positively  and  greatly  increased  by  the 
territorial  division  of  labour  established  between  them. 

To  set  this  important  principle  in  a  clearer  point  of  view,  let 
us  suppose  that  in  England  a  given  number  of  men  can,  in  a 
given  time,  manufacture  10,000  yards  of  cloth,  and  raise  1000 
quarters  of  wheat,  and  that  the  same  number  of  men  can,  in 
the  same  time,  manufacture  in  Poland  5000  yards  of  cloth  and 
raise  2000  quarters  of  wheat.  It  is  plain,  that  the  establish- 
ment of  a  free  intercourse  between  the  two  countries  would,  in 
these  circumstances,  enable  England,  by  manufacturing  cloth 
and  exporting  it  to  Poland,  to  obtain  twice  the  quantity  of  corn 
in  exchange  for  a  given  expenditure  of  capital  and  labour  that 
she  could  obtain  in  return  for  the  same  expenditure  directly  laid 
out  in  the  cultivation  of  land  at  home  ;  and  Poland  would,  on 
the  other  hand,  be  enabled  to  obtain  twice  as  much  cloth  in  ex- 
change for  her  corn  as  she  could  have  done  had  she  attempted 
directly  to  manufacture  it.  How  ridiculous  then  to  contend, 
that  commerce  is  not  the  means  of  adding  to  the  efficacy  of  la- 
bour, and,  consequently  of  increasing  wealth !  Were  the  inter- 
course between  England  and  Portugal  and  the  West  Indies  put 
an  end  to,  it  would  require,  at  the  very^lgast,  a  hundred,  or 
perhaps  a  thousand  times  the  expense  to  produce  Port  wine, 
sugar,  and  coffee,  directly  in  this  country,  that  it  does  to  pro- 
duce the  equivalents  sent  to  Portugal  and  the  West  Indies  in 
exchange  for  them. 

"The  commerce  of  one  country  with  another  is,"  to  use  the 
words  of  Mr.  Mill,  "  merely  an  extension  of  that  division  of  la- 
bour by  which  so  many  benefits  are  conferred  on  the  human 
race.  As  the  same  country  is  rendered  richer  by  the  trade  of 
one  province  with  another  ;  as  Us  labour  becomes  thus  infinitely 
more  divided  and  more  productive  than  it  could  otherwise  have 
been  ;  and  as  the  mutual  interchange  of  all  those  commodities 
which  one  province  has  and  another  wants,  multiplies  the  ac- 
commodations and  comforts  of  the  whole,  and  the  country  be- 
comes thus  in  a  wonderful  degree  more  opulent  and  happy ;  so 
the  same  beautiful  train  of  consequences  is  observable  in  the 
world  at  large,  that  vast  empire  of  which  the  different  kingdoms 
may  be  regarded  as  the  provinces.  In  this  magnificent  empire, 
one  province  is  favourable  to  the  production  of  one  species  of 
produce,  and  another  province  to  another.     By  their  mutual 


<2  POLITICAL    ECONOMY. 

Tcrritoriai  iiitercoursc,  mankind  are  enabled  to  distribute  their  labour  as 
Labour"  "^  ^^^^  ^^^  ^^^  genius  of  each  particular  country  and  people.  The 
industry  of  the  whole  is  thus  rendered  incomparably  more  pro- 
ductive ;  and  every  species  of  necessary,  useful,  and  agreeable 
accommodation  is  obtained  in  much  greater  abundance,  and  with 
infinitely  less  expense." — (^Commerce  Defended,  p.  38.) 

To  enter  into  a  more  enlarged  discussion  of  this  interesting 
and  important  subject,  would  be  inconsistent  with  the  object 
and  limits  of  this  article.    In  our  articles  ou  Colonies*  and  the 

*  Of  the  articles  here  referred  to,  all  are  not  from  the  pen  of  Mr.  M'Cul- 
loch.    The  only  one  that  will  be  here  taken  up  is  that  of  "  Colonies." 

Colonies  have  been  formed  at  different  periods  from  different  motives : 
in  ancient  times  from  the  pressure  of  a  surplus  population,  in  modern  times 
from  the  spirit  of  commercial  enterprise :  and  in  both  as  a  relief  from  per- 
secution at  home,  real  or  imasrinmy.  But  from  whatever  motives  esta- 
blished, the  policy  of  the  mother  country  towards  them,  has  ever  been  the 
same :  viz.  that  of  enorossing  to  itself  the  benefits  of  their  trade,  by  ex- 
I'luding  all  intercourse  with  strangers.  Such  were  the  provisions  of  the 
navigation  laws  of  Greece,  Rome,  and  Carthage,  and  such  have  been  those 
of  modern  Europe,  from  the  days  of  Venice  downwards.  Among  these 
numerous  instances,  those  of  England  have  been  the  most  systematic,  and 
to  us  at  least,  the  most  interesting.  They  began  with  the  Commercial  Or- 
dinance of  1646,  and  were  formed  into  a  system  by  the  celebrated  Naviga- 
tion Act  of  1631 ;  an  act  regarded  until  lately,  as  tlie  Palladium  of  British 
irommerce, 

As  the  subject  of  colonies  is  one  in  which  this  country  is  not  practically 
interested,  it  will  be  sufficient  to  point  out  to  the  student  some  of  the  sources 
of  scientific  information  upon  it.  They  will  be  found  in  Adam  Smith,  Book 
IV.  chap.  7.,  Say,  Book  I.  chap.  19.,  Ricardo,  chap,  xxv.,  Mills,  sect.  17. 
As  practical  arguments  against  the  whole  system  of  colonial  restraint,  may 
be  mentioned  the  general  fact  of  such  colonies  being  sources  of  expense,  in 
place  of  profit,  to  the  mother  country, — and  of  the  particular  instances  of 
mutual  advantage,  to  both  Great  Britain  and  her  North  American  Colo- 
nies, resulting  from  the  independence  of  the  latter ;  of  the  favourable  ef- 
fects on  English  commerce,  by  the  recent  modification  of  the  East  India 
Company's  charter ;  and  the  open  acknowledgment,  on  the  part  of  her 
practical  statesmen,  of  the  impolicy  of  all  such  restrictions. 

Of  these  the  most  interesting  as  well  as  convincing,  is  the  case  of  our  own 
country — which  therefore  deserves  some  fuller  notice. 

Great  Britain  and  her  American  Colonies. 

The  American  coloMes  were  established,  generally,  in  the  spirit  of  free- 
dom,— it  was  the  purchase  which  repaid  J.he  colonists  for  exile, — and  so  far 
as  they  were  left  free  to  pursue  their  own  measures,  they  were  in  accord- 
ance with  the  liberal  principles  of  the  science  of  Political  Economy  : — 
arrived- at,  not  indeed  by  speculation,  but  by  the  clear-sightedness  of  men 
Avho  pursue  their  own  interests,  unshackled  by  the  arbitrary  restraints  of 
government. 

For  proof  of  this,  their  charters,  and  still  more,  their  early  fundamental 
laws  may  be  referred  to.  Monopolies,  one  of  the  great  burthens  they  ha.d 
lain  under  at  home,  were  strictly  prohibited.  In  the  New  England  code, 
issued  1641,  it  was  enacted  that  there  never  should  be  "  any  bond  slavery 
or  villainage  among  the  inhabitants  of  the  province," — that  there  should 
be  "  no  monopolies  but  of  such  new  inventions  as  were  profitable  for  the 
country,  and  those  for  a  short  time  only."  To  use  the  language  of  the 
charter  of  William  Penn, — the  intent  of  these  fundamental  constitutions, 
was  "  for  the  support  of  power  in  reverence  with  the  people,  and  to  secure 
the  people  from  the  abuse  of  power  ;  since  liberty  without  obedience  is 
confusion,  and  obedience  without  liberty  is  slavery.'' 

The  operation,  however,  of  these  salutary  principles,  was  early  checked 
by  a  spirit  of  colonial  monopoly,  on  the  part  of  the  government  at  home. 
In  1C51,  the  Parliament  of  England  passed  the  famous  Act  of  Navigation, 
grounded  upon  a  commercial  jealousy  of  the  Dutch,  who,  from  their  supe- 
tior  cheapness  of  freight  had  become  the  carriers  between  the  colonies  and 
the  mother  countrv.     This  confined  the  trade  to  British  bottoms,  and  was 


POLl'<^       "^'.CONOMY.  73 

tJoRN  Trade  and  Laws,  '^y  maive  examined  the  policy  of  the  ^oj[^J»'^'«'j. 
restrictions  on  the  coloniaPtWadc,  and  on  the  corn  trade  ;  and  Labour!  ° 
in  the  article  Exchange,  v.e  have  pointed  out  the  circumstances 
which  regulate  the  importation  and  exportation  of  the  precious 
metals  ;  and  have  shown,  that,  instead  ol  the  excess  of  exports 
over  imports  being  any  criterion  of  an  advantageous  commerce, 

immediately  remonstrated  against  by  the  colonists,  as  an  act  at  once  of 
injustice  and  impolicy.  The  further  acts  of  trade,  after  the  Restoration  in 
1660,  led  to  more  spirited  remonstrances,  and  eventually  on  the  part  of 
Massachusetts,  to  a  resistance  whicli  required  the  interference  of  royal 
commissioners, — they  came  over  in  1667,  but  seem  to  have  returned  with- 
out eflectnig  the  purpose  of  force  or  persuasion,  on  which  they  were  sent. 
In  1670  and  1672,  the  Parliament  proceeded  ui  the  same  unwise  policy, 
from  a  jealousy  of  the  shipping  and  fisheries  of  New  England,  to  enforce 
customs  on  this  fettered  commerce ;  and  in  1676,  upon  complaint  being 
made  "  that  the  inhabitants  of  New  England,  not  only  traded  to  most  parts 
of  Europe,  but  encouraged  foreigners  to  go  and  traffic  with  them,"  the 
governors  of  these  particular  colonies,  were  commanded  by  royal  autho- 
rity, to  enforce  a  strict  obedience  to  the  laws  of  trade. 

For  this  purpose,  collectors  were  now,  for  the  first  time,  appointed : — 
among  others,  Edward  Randolph  for  the  town  of  Boston  ;  but  "  he  was 
considered,'''  says  Chalmers,  "as  an  enemy,  and  opposed  with  the  steady 
zeal  of  men  who  deemed  their  chartered  privileges  invaded." — Chalmers, 
B.  I.  p.  320.  H§  twice  unsuccessfully  attempted  the  performance  of  his 
invidious  duty  ;  but  on  writing  home  that  he  was  in  danger  of  being  pun- 
ished with  death,  by  virtue  of  an  ancient  law,  as  a  subverter  of  the  Con- 
stitution, he  was  at  length,  in  the  year  1682,  ordered  to  return  to  England. 
The  power  of  the  government,  however,  and  the  arbitrary  policy  of  the 
latter  Stuarts,  was  an  overmatch  for  the  spirit  or  wisdom  of  the  Colonies : 
— a  writ  of  "  quo  warranto,"  followed  by  the  forfeiture  of  the  colonial 
charters,  was  attended  by  such  fatal  consequences  to  the  peace  and  pros- 
perity of  society,  that  an  unwilling  and  imperfect  obedience  to  this  restric- 
tive policy,  was  at  length  established. 

Its  provisions,  however,  were  not  strictly  entbrced,  and  "  an  irregular 
and  scrambling  trade,"  as  Governor  Pownall  describes  it,  continued  to  be 
kept  up  with  other  countries,  which  somewhat  relieved  the  burthen  of 
thefe  restrictions,  though  it  was  far  from  satisfymg  either  the  feelings  or 
demands  of  the  Colonists. 

Matters  continued  much  in  this  state  until  the  termination  of  the  French 
War,  in  1763,  when  the  fall  of  the  Canadas  having  removed  from  Great- 
Britani  all  fear  of  rival  influence  on  the  American  continent,  she  proceeded 
to  enforce  with  greater  strictness  the  provisions  of  the  various  acts  of  trade 
which  had  been  past  in  relation  to  the  Colonies,  but  which  policy  had 
hitherto  permitted  to  remain  comparatively  unenforced.  The  new  policy 
was  alike  unwise  in  its  principles  and  fatal  in  its  result.  The  Colonies 
were  gradually  driven,  first  to  an  unwilling  resistance,  and  eventually  to  a 
still  inore  unwilling  separation, — a  separation,  however,  which  by  its  happy 
results,  in  augmenting  the  wealth  and  resources  of  both  countries,  through 
the  medium  of  a  free  trade,  has  for  ever  put  down  the  policy  of  colonial  re- 
strictions, and  settled,  we  may  consider  conclusively,  the  greatest  of  all 
questions  in  the  science  of  Political  Economy. 

For  further  information  on  this  head,  see  American  Annals  by  Abiel 
Holmes,  Cambridge  1805;  Marshall's  History  of  the  Colonies;  Brough- 
am's Colonial  Policy;  Anderson's  History  of  Commerce;  Seybert's  Statis- 
tical Tables,  Philadelphia  1818;  and  on  the  Navigation  Laws,  see  Quar- 
terly Review,  Vol.  xxviii.  p.  480,  No.  48.  Art.  I.  No.  56.  Art.  VIII. 

That  the  policy  above  stated  materially  retarded,  though  it  could  not 
altogether  prevent,  the  mutual  advantages  of  trade  between  Great  Britam 
and  this  country,  is  evinced  beyond  all  doubt  by  the  different  state  of  that 
commerce  before  and  after  the  separation.  This  comparison,  however, 
should  not  be  instituted  until  after  the  organization  of  the  federal  govern- 
ment, when  unity  and  steadiness  were  first  given  to  its  national  policy. 

During  the  Revolutionary  war  commerce  had  been  at  an  end ;  nor  did 
peace  enable  the  country  to  resume  it ; — domestic  dissension  and  foreign 


74  POLITICAL  ECONOltfY. 

Territorial  it  IS  just  the  reverse,  and  thattit  is  by  the  excess  of  the  value  of 
ribolS"  "*^  '^*^  imports  over  the  value  of  the  ilmdrts  that  the  direct  gains  of 
the  merchants,  and  consequently  of  the  community,  are  to  be 
estimated.  In  the  fourth  book  of  the  Wealth  of  Nations,  Dr. 
Smith  has  examined  and  refuted  the  various  arguments  in  fa- 
vour of  the  restrictions  imposed  on  the  freedom  of  commerce, 

jealousy,  opposed  many  obstacles ;  Great  Britain,  France,  Spain,  and  For* 
tugal,  all  rejected  our  commercial  overtures.  Still  the  tone  of  our  govern- 
ment was  that  of  the  truest  liberality,  and  the  highest  wisdom, — "  instead 
of  embarrassing  commerce,"  is  the  language  of  the  Report  of  the  Secretary 
of  State,  Feb.  23,  1791,  "  under  piles  of  regulating  laws,  duties,  and  prohi- 
bitions, it  should  be  relieved  from  all  its  shackles  in  all  parts  of  the  world, 
— would  even  a  single  nation  begin  with  the  United  States  this  system  of 
free  commerce,  it  would  be  adviseable  to  begin  it  with  that  nation." 
'  From  the  year  1790,  when  the  country  may  be  considered  as  having  first 
entered  upon  it,  to  1806,  a  course  of  commercial  prosperity  existed,  surpass- 
ing all  former  experience.  About  the  latter  period  arose  checks  of  a  poli- 
tical nature,  which  continued  to  operate  directly  until  the  year  1816,  and  in- 
directly, it  may  be  said,  almost  ever  since.  From  these  impediments,  how- 
ever, the  country  is  again  rising  in  its  native  strength,  and  bids  fair  to  rival, 
if  not  surpass,  its  former  prosperity,  notwithstanding  some  peculiar  advan- 
tages it  then  enjoyed. 

The  comparative  influence  of  these  two  systems  upon  national  prospe- 
rity, will  be  best  illustrated  by  the  following  statistical  statements,  drawn 
from  the  best  authorities,  and  exhibiting  their  respectite  influence  upon, 
I.  Great  Britain,  2.  The  Colonies,  or  United  States  at  large,  and  3.  Upon 
the  City  of  New-York  in  particular. 

1.  Great  Britain. — 

Exports  to  the  Thirteen  Colonies  in  the  year  1700,  £  343,828  stg. 

Exports  to  the  Thirteen  Colonies  for  an  average  of  >  „ gig  q7a 

six  years  previous  to  1774,  British  manufactures,  )  ^     ' 

Exports  to  the  United  States,  an  arerage  of  six  years  >  2  119  817 

previous  to  1739,  the  year  of  our  confederation,  \  '       ' 

Exports  to  the  United  States  on  an  average  of  eight  ^  <;  144  op  7 

years  terminating  in  1800,                                          >  '       ' 

Exports  to  the  United  States  in  1806,  the  year  of)  y^  ggr  rr, 

highest  commercial  prosperity,                                ^  ~5       » 

2.  United  States. — 

Exports  of  the  Colonies  on  an  average  of  the  three  >  a  1  qg.->  c^o 

years,  1771,  1772,  1773,                                           \  ^   ^''^^^'^•^~ 

Total  value  of  exports  from  the  U.  States  in  1790,  19,012,041 

Total  value  of  exports  from  the  U.  States  in  1795,  67,064,097 

Increase  in  five  years,  48,052,050 

Total  value  of  exports  from  the  U.  States  in  1800,  94,115,925 

Increase  in  ten  years,  75,103,884 

Total  value  of  exports  from  the  U.  States  in  1805,  101,536,963 

Increase  in  fifteen  years,  82,524,922 

Total  value  of  exports  from  the  U.  States  in  1806,  >    ^Qg  ^^^  ^rQ 
when  at  their  maximum,  )  '      ' 

Increase  in  sixteen  years,        89,331,109 

Styhcrfs  Statistics. 

Of  the  year  just  past,  1824,  the  exports  to  England 
alone,  exclusive  of  Scotland  and  Ireland,  exceed 
the  total  amount  of  exports  of  1790.  being  19,487,123 

Treasrirv  Reports. 


POLITICAL   ECONOMY.  75 

in  the  most  able  and  masterly  manner,  and  ^ith  an  amplitude  of  Territorial 
illustration,  which  leaves  nothing  to  be  d-i<ired.  A  very  com-  Labour"  °*^ 
plete  exposure  of  the  sophisms  of  the  French  economists,  on 
the  subject  of  commerce,  may  be  found  in  the  ingenious  and 
valuable  pamphlets  of  Mr.  Mill  [Commerce  Defended')  and  Co- 
lonel Torrens  (Economists  Refuted,)  written  in  answer  to  Mr. 
Spence's  pamphlet  entitled,  Britain  Independent  of  Commerce. 
The  chapter  on  Foreign  Trade  in  Mr.  Ricardo's  great  work  is 
equally  original  and  profound,  and  deserves  to  be  carefully 
studied  by  those  who  wish  to  make  themselves  thoroughly  ac- 
quainted with  the  theory  of  commerce. 

When  the  division  of  labour  was  first  introduced,  barter  was  Money. 
the  only  method  by  which  commodities  were  exchanged.  But 
according  as  society  advanced,  as  the  division  of  employments 
was  extended,  and  as  exchanges  became  more  numerous,  the 
advantage  of  using  some  one  commodity  as  a  common  medium 
of  exchange — as  an  equivalent  for  all  other  commodities,  and 
as  a  standard  by  which  to  ascertain  their  relative  values,  soon 
became  obvious.  But  this  is  a  subject  of  which  we  have  else- 
where treated  at  considerable  length  ;  and  %ve  beg  leave  to  re- 
fer our  readers  for  a  full  investigation  of  the  nature  and  func- 
tions of  the  common  medium  of  exchange  to  the  article  Money* 
in  this  Supplement,  and  the  authorities  there  quoted. 

Progress  of  Tonnage  of  the  United  States. — 

Vessels  built  in  the  Colonies  in  1769,  amounted  to    20,001  tons. 
Do.  do.  do.  in  1789,  do.  4,366 

Do.  do.  do.  in  1805,  do.  128,507 

Do.  do.  do.  in  1814,  do.         154,624 


Treasury  Reports 


New-York. — 


Of  this  city  it  is  matter  both  of  interest  and  pride,  to  trace  tlie  rapid 
advances. 

In  the  year  1678,  the  city  of  New- York  contained  343  houses,  had  on 
an  average  from  10  to  15  vessels,  averaging  100  tons  each,  owned  in  Great 
Britain,  and  trading  to  the  colony  in  the  course  of  the  year,  and  importing 
into  it  commodities  to  the  value  of  £50,000  currency,  or  $125,000.  See 
Answers  of  Sir  Edward  Andros,  Governor,  1678,  to  Inquiries  of  the  Com- 
mittee of  the  Colonies. 

Its  exports  amounted  in  the  year  1763,  to     $134,971 
Do.  do.  do.  1773,  190,616 

Anderson'' s  History  of  Commerce. 

Do.  do.  do.  1793,         2,932,370 

Do.  do.  do.  1803,        10,818,387 

Do.  in  1813,  a  period  of  war,  8,185,494 

Do.  do.  do.  1817,        18,707,433 

SeyberCs  Slatislics. 
Its  exports  commencing  Oct.  1, 1823,  >        ^c,  oq7  ,0- 
and  ending  Sept.  30,  1824,  $       ^^»y/,lJa 

Treasury  Reports. 

*  In  addition  to  the  references  here  made  to  articles  in  the  supplement 
to  the  Encyclopedia  from  which  the  present  is  extracted,  the  Editor  thinks 
best  to  give  at  once  to  his  readers  a  complete  list  of  tliose  therein  contain- 
ed, which  fall  within  tlie  science  of  Political  Economy.  Many  of  them  are 
very  ably  written,  and  all  worthy  of  reference.  As  adding  to  the  interest 
that  may  be  taken  in  them,  the  names  of  their  respective  authors  are  an- 
nexed, together  with  the  signatures  by  which  their  contributions  to  that 
work  are  known, 


76  POLITICAL    ECONOMV. 

Arcumula-  ACCUMULATION    A^  <  EMPLOYMENT  OF  CaPITAL. Capital  may 

pioymennlif  be  defined  to  be  ''tllU  portion  of  the  produce  of  labour  which  is 

Capital        saved  from  immediate  consumption.,  and  employed  in  maintaining 

productive  industry,  or  in  facilitating  production."     Its  accu- 


J.  R.  M'Culloch,  Esq.  known  by  ihe 
signature  S.  S.  ;  author  of  the  pre- 
sent article  ;  now  Ricardo  Lecturer, 
London. 


Exchange. 

Interest. 

Money. 

Taxation. 

Cottage  System. 

Corn  Laws  and  Trade. 

Emigration.  "i    D.  Buchanan,  Esq.  of  Edinburgh.  Sig- 

Banking.  \       nature  O. 

Cotton  Manufactory.  >   D.  Bannatyne,  Esq.  Glasgow.  Signa- 

Credit.  S       ture  T.  T. 

i  By  the  late  David  Ricardo,  Esq.  who  may  justly  be 

Trading  System.    >       considered,  after  A.  Smith,  as  a  second  founder  of 
)       the  science.     Signature  E.  B.  E. 
"^    Rev.  John  B.  Sumner,  well  known  as  the  able  Apologist 
of  both  Natural  and  Revealed  Religion.     This  article 

Poor  Laws.     >       is  marked  by  that  singular  clearness  and  conclusive- 
ness of  reasoning  which  distinguish  his  "  Evidences." 
Signature  N.  N.  N. 
Rev.  T.  R.  Malthus,  author  of  the  well  known  works  on 

p       J  .  •  f       Population,  Rent,  k.c.  and  at  present.  Professor  of  Po- 

^  *    I       litical  Economy  in  the  East  India  College,  Hertford. 

)       Signature  O.  O.  O. 

i  Joseph  Lowe,  Esq.  author  of  a  valuable  work,  already 
alluded  to.     "  The  Present  State  of  England."     Sig- 
nature D.  D. 
Coinage. — R.  Mushet,  Esq.  of  the  Royal  Mint.     Signature  A.  A. 
Economists.  ~1    ,    ,,.,,    _       ^       i  ..  <-  ,,  r.  ■.•  ,   t    ,•    ,^ 

Bank  for  S  v'   <>■  J.  Mill,  Esq.  London,  author  of  "  British  India, ' 

T>  ^  '    I       "  Elements  of  Political  Economy,"  often  quo- 

Benefit  S     ■  t  I        '■^'^  '"  ^^^  present  article,  and  a  large  contribu- 

Colonies.""""  ^'      J        ^^^^  ^°  ^'^^  supplement. 

The  article  on  Money,  here  especially  referred  to  in  the  text,  is  a  long 
and  able  one  from  the  pen  of  Mr.  M'Culloch.  Its  length  and  the  importance 
of  the  subject,  put  beyond  the  compass  of  a  note,  any  analysis  of  its  con- 
tents.   A  few  observations  on  the  subject  must  suffice. 

From  the  inconveniences  of  barter,  arose  among  all  nations  at  an  early 
period,  the  adoption  of  some  commodity  which  might  serve  as  a  measure  of 
value,  aud  consequently  as  a  medium  of  exchange.  The  substances  so 
adopted  were  various,  but  have  gradually  disappeared  before  the  superior 
facilities  for  that  purpose,  aflbrded  by  the  precious  metals. 

Upon  their  adoption,  they  first  passed  by  weight,  subsequently  by  tale — 
when  coinage  had  ascertained  the  value  of  the  pieces.  Such  money  when 
coinage  is  free,  passes  for  its  intrinsic  worth,  i.  e.  the  cost  of  its  production, 
the  stamp  ascertaining  its  value,  but  not  giving  it. 

When  coinage  is  monopolized  by  the  government,  as  it  commonly  is,  coin 
may  bear  a  moderate  advance  of  value  beyond  its  real  worth.  This  is 
termed  a  seigniorage,  and  is  a  tax  imposed  by  government  on  the  commu- 
nity, through  the  medium  of  the  coin. 

The  advantage  of  a  seigniorage,  is  that  it  retains  the  coin  in  the  country — 
it  being  there  of  greater  value  than  elsewhere — its  disadvantage  is,  that  it 
tempts  to  private  coining.  On  this  subject  see  A.  Smith,  Book  1.  ch.  V. — 
Say,  Book  I.  ch.  21.  sect.  4. —  Ricardo,  ch.  13,  and  ^7;  and  Tracts  on 
Bullion,  reviewed  in  Quarterly,  V^ol.  III.  p.  152. 

The  inconveniences  attending  the  transmission  of  coin,  led  gradually 
among  commercial  nations  to  the  adoption  of  Bills  of  Exchange,  and  these 
1o  a  general  system  of  f)apcr  credit,  under  the  form  of  Promissory  Notes, 
payable  on  demand ;  under  which  form  paper  now  supplies  at  a  cheaper 
rate  the  services  which  would  otherwise  be  performed  by  a  metallic  cur- 
rency. This  is  the  system  of  Banking,  a  subject  too  extensive  and  compli- 
'•Hfed.  to  be  here  satisfactorily  treated. 


I'OLlTrCAL    ECOXOMV.  // 

nmlation  and  employment  is  indispensably  necessary  to  the  sue-  Kmpioymcnt 
cessful  prosecution  of  almost  every  branch  of  industry.  With- "'  •''"'" 
out  that  species  of  capital,  which  chiefly  consists  of  tools  and 
engines,  and  which  has  been  denominated  fixed,  labour  could 
never  be  rendered  considerably  productive  ;  and  without  that 
species  of  capital  which  chiefly  consists  of  the  food  and  clothes 
required  for  the  consumption  of  the  labourer  during  the  time  he 
is  employed  in  the  production  of  commodities,  and  which  has 
been  denominated  circulating,  he  never  could  engage  in  any  un- 
dertaking which  did  not  yield  an  almost  immediate  return.     An 

A  few  principles,  however,  will  be  stated. 
.  Instead  of  gold  and  silver  currency  being,  as  it  was  falsely  esteemed  by 
the  mercantile  writers,  the  only  wealth  of  a  country,  it  is  now  acknow- 
ledged to  be  the  only  portion  of  its  wealth  which  is  unproductive.  Its 
value  lies  solely  in  the  facility  it  gives  to  the  exchange,  of  what  is  truly  the 
active  capital  of  the  nation,  its  industry  and  commodities.  Hence  money 
is  to  be  regarded  in  the  light  of  an  instrument  or  machine,  whose  only  value 
consists  in  the  work  it  executes.  If  a  cheaper  machine  can  perform  the 
same  work,  it  is  consequently  to  be  preferred,  and  the  nation  becomes  the 
gainer  by  the  difference  of  their  cost. 

Such  a  machine  is  paper  money,  which  is  based  upon  credit,  and  not  like 
coin  upon  intrinsic  value  ;  and  the  gain  to  the  country  in  its  use,  is  the  sur- 
plus coin  which  is  sent  abroad  in  productive  exchanges. 

The  danger  of  paper  money,  lies  in  a  surplus  issue  by  tliose  who  have 
the  power  of  making  it.  The  effect  of  such  surplus  is  the  rise  of  all  mo- 
ney prices,  the  depreciation  of  the  currency  as  compared  with  gold  and 
silver,  and  all  the  disadvantages  consequent  on  such  a  state  of  things,  in  an 
intercourse  with  foreign  nations.  Against  this  abuse  of  power  on  the  part 
of  government  or  of  banks,  the  only  sufficient  check  is  the  immediate  con- 
vertibility of  the  paper  at  the  will  of  the  holder  into  that  which  it  repre- 
sents, gold  and  silver.  This  keeps  the  amount  of  paper  in  circulation  at 
the  level  demanded  by  the  business  of  the  country ;  and  that  limitation  of 
quantity  maintains  it  at  its  full  value. 

Wherever  this  check  is  removed,  the  power  of  issue  will  be  abused.  It 
was  so  by  the  bank  of  England  under  the  restriction  bill,  of  1797  ;  it  was 
so  also,  by  the  banks  in  this  city  during  the  late  war. 

This,  therefore,  is  the  fundamental  principle  on  v.-hich  all  paper  currency 
must  rest — its  convertibility  at  the  will  of  the  holder,  into  that  of  which  it 
is  but  the  representative,  viz.  gold  and  silver. 

But  this  like  all  other  ends  is  to  be  attained  by  the  cheapest  means — it 
is  convertibility  and  not  actual  conversion  into  intrinsic  value,  which  is 
needed.     All  that  the  public  v/ant,  is  a  sufficient  check  against  over  issues. 

On  this  principle  Ricardo,  on  the  return  of  the  bank  of  England  to  spe- 
cie payments,  in  the  year  1818,  urged  the  adoption  of  a  new  provision 
equally  secure,  and  more  economical,  viz.  convertibility  into  bullion  and  not 
intocoin. — See  Economical  and  Safe  Currency;  also.  Ed.  Rev.  No.  61,  Art.  3. 

Had  this  taken  place,  it  would  have  removed  the  check  from  the  hands 
of  the  public  to  those  of  the  bullion  merchants,  where  it  would  have  been 
more  sensitive,  equally  efficacious,  and  more  economical ;  as  it  would  have 
set  free  all  the  coin  imprisoned  in  the  vaults  of  the  bank. 

Where  a  number  of  banks  exist  together,  as  in  this  city  and  counti-y,  the 
public  are  saved  the  necessity  of  guarding  against  over  issues  by  any  indi- 
vidual bank,  by  the  mutual  jealousy  of  rival  institutions — the  frequent 
settlement  of  balances  among  themselves,  as  they  become  debtor  or  creditor 
to  each  other  is  the  most  delicate  and  powerful  check  against  all  indivi- 
dual encroacliment.  This,  however,  is  a  matter  of  private  interest,  with 
which  the  public,  as  such,  have  nothing  to  do.  Against  a  uniform  increase 
of  issues  on  the  part  of  all  the  banks,  it  evidently  affords  no  security :  in 
that  case  individual  holders  must  control  them,  by  the  power  of  returnii|g 
upon  them  a  currency  which  they  have  degraded. 

For  the  history  and  principles  of  banking,  see  A.  Smith,  Book  II.  ch.  2. — 
Say,  Book  I.  ch.  22.— Ricardo,  Tracts  on  Currency,  ^ills,  ch.  3,  sect.  9, 10, 
&c.— And  for  a  defence  of  the  Restriction  Bill,  «ee  Thornton  on  the  Paper 
CuiTency  of  Great  Britain. — E. 

10 


<y  I'OLITICAL    ECOXO.MV. 

Kmpioympnt  iigricullural  labourer,  for  example,  might  have  an  ainjile  supplx 
"'''"' '  of  carts  and  ploughs,  of  oxen  and  horses,  and  generally  of  all 
the  instruments  and  animals  used  in  his  department  of  industry, 
but  if  he  were  destitute  of  circulating  capital,  or  of  food  and 
clothes,  he  would  not  be  able  to  avail  himself  of  their  assistance, 
and  instead  of  tilling  the  ground,  would  have  to  betake  himself 
immediately  to  some  species  of  appropriative  industry  :  and,  on 
ihe  other  hand,  supposing  the  husbandman  to  be  abundantly 
supplied  with  provisions,  what  could  he  do  without  the  assis- 
tance oi'  Jtxed  capital  or  tools  ?  What  could  the  most  skilful 
agriculturalist  perform  if  he  were  deprived  of  his  spade  and  his 
plough  ?  a  weaver  if  he  were  deprived  of  his  loom  ?  or  a 
house-carpenter  if  he  were  deprived  of  his  saw,  his  hatchet, 
and  his  planes  ?  The  accumulation  and  employment  of  both 
tixed  and  circulating  capital  is  indispensably  necessary  to  ele- 
vate any  nation  in  the  scale  of  civilization.  And  it  is  only  by 
their  conjoined  and  powerful  operation  that  wealth  can  be  largely 
produced  and  universally  diffused. 

The  division  of  labour  is  a  consequence  of  the  previous  ac- 
cumulation of  capital.  Before  labour  can  be  divided,  "  A  stock 
of  goods  of  different  kinds  must  be  stored  up  somewhere,  suffi- 
cient to  maintain  the  labourer,  and  to  supply  him  with  the  ma- 
terials and  tools  for  carrying  on  his  work.  A  weaver,  for  ex- 
ample, could  not  apply  himself  entirely  to  his  peculiar  business, 
unless  there  was  beforehand  stored  up  somewhere,  either  in  his 
own  possession,  or  in  that  of  some  other  person,  a  stock  suffi- 
cient for  his  maintenance,  and  for  supplying  him  with  the  mate- 
rials and  implements  required  to  carry  on  his  work,  till  he  has 
not  only  completed  but  sold  his  web.  This  accumulation  must 
evidently  be  previous  to  his  applying  himself  for  so  long  a  time 
to  a  peculiar  business." — (^Wealth  of  Nations,  Vol.  I.  p.  408.) 

As  the  accumulation  of  stock  must  have  preceded  the  divi- 
sion of  labour,  so  its  subsequent  division  can  only  be  extended 
as  capital  is  more  and  more  accumulated.  Accumulation  and 
division  act  and  react  on  each  other.  The  quantity  of  raw  ma- 
terials which  the  same  number  of  people  can  work  up  increases 
in  a  great  proportion,  as  labour  comes  to  be  more  and  more 
subdivided  ;  and  according  as  the  operations  of  each  workman 
are  reduced  to  a  great  degree  of  identity  and  simplicity,  he  has, 
as  we  have  already  explained,  a  greater  chance  of  discovering 
machines  and  processes  for  facilitating  and  abridging  his  labour. 
The  quantity  of  industry,  therefore,  not  only  increases  in  every 
country  with  the  increase  of  the  stock  or  capital  which  sets  it 
in  motion  ;  but,  in  consequence  of  this  increase,  the  division 
of  labour  becomes  extended,  new  and  more  powerful  imple- 
ments and  machines  are  invented,  and  the  same  quantity  of  la- 
bour is  thus  made  to  produce  an  infinitely  greater  quantity  oi' 
commodities.* 

*  Lauderdale,  in  his  exaggerated  view  of  the  importance  of  capital, 
magnifies  it  into  one  of  the  great  causes  of  tlie  superiority  of  man  over 
the  brutes — it  may  fairly  be  stated  to  be  one  of  civilized  over  savage  man. 

Say,  takes  up  the  consideration  of  capital  in  a  wider  sense  than  our  au- 
thor, embracing  mental  as  well  as  material  wealth.  Mental  or  inunaterial 
capital,  which  consists  of  acquired  skill  or  learning,  is  marked  further  by 
ttic  following  characteristics. 

1.  It  is  so  personally  appropriated  that  it  can  neither  be  withdrawn  nor 
transferred. 


I'OLITICAL   ECOXOMY, 


re 


Besides  its  effect  in  enabling  labour  to  be  divided,  capital  con-  Knuiioymeni 
tributes  to  facilitate  labour,  and  produce  wealth  in  the  three  fol-  "    "^"  " " 
lowing  ways  : 

First.— It  enables  us  to  execute  work  that  could  not  be  exe-  JJ°fj,%;;; 
cuted,  or  to  produce  commodities  that  could  not  be  produced  Employment 

.^,     '  ,   ..         ^  of  Capital 

without  it.  Facilitates 

Second. — It  saves  labour  in  the  production  of  almost  every  Labour. 
species  of  commodities. 

T/iirJ. — It  enables  us  to  execute  work  better,  as  well  as  more 
expeditiously. 

With  regard  to  the  first  of  these  modes  in  which  we  are  be-  Jip'^^'/J);'' 
nefited  by  the  employment  of  capital,  or  to  the  circumstance  of  produce 
its  enabling  ws  io  produce  commodities  that  cordd  not  be  produ-  {j^°"'™uMi'o', 
ced  without  it,  it  is  plain  that  the  production  of  all  such  com- be  producci 
modifies  as  require  a  considerable  period  for  their  completion,  '""°" 
could  not  have  been  attempted  if  a  stock  of  circulating  capital, 
or  of  food  and  clothes  sufficient  for  the  maintenance  of  the  la- 
bourer, while  employed  on  them,  had  not  been  previously  pro- 
vided.    But  the  employment  of  fixed  is  frequently  as  necessary 
to  the  production  of  commodities  as  the  employment  of  circu- 
lating capital.     It  would  be  plainly  impossible  to  produce  a  pair 
of  stockings  without  the  aid  of  wires  ;  and  although  the  ground 
might  be  cultivated  without  the  aid  of  the  plough,  it  could  not  be 
cultivated  without  the  aid  of  a  spade  or  a  hoe.     If  we  run  over 
the  vast  catalogue  of  the  various  arts  practised  in  a  highly  po- 

2.  Its  ong;inal  investment  is  to  be  calculated  at  the  time,  money,  and  sup- 
poi-t  of  the  individual  during  the  period  of  its  acquisition. 

3.  Its  present  value  and  amount,  is  to  be  estimated  at  a  sum  which  would 
purchase  an  annuity,  equivalent  to  the  salary  or  wages  such  acquisitions 
would  command,  or  rather  somewhat  below,  thus  leaving  a  premium 
against  the  risk  of  loss  of  health  or  employment. 

Paley's  acute  mind  lighted  upon  this  principle  at  an  eaidier  period,  in 
solving  a  question  of  Morals.     See  Moral  Philosophy,  book  III.  ch.  13. 

To  these  enlarged  views  of  capital,  the  English  writers  generally  arc 
opposed,  on  the  gi-ound  that  they  destroy  the  precision  of  the  science,  by 
bringing  in  subjects  of  a  general  and  moral  nature,  and  such  as  are  incapa- 
ble of  precise  definition.  But  a  higher  consideration  is,  whether  they  are 
not  just ;  whether  such  a  capital  does  not  actually  exist  in  society,  equally 
with  a  material  one  supporting  its  possessor,  and  equally  advancing  the 
prosperity  of  the  community.  If  this  be  the  case,  we  are  not  left  at  liberty  to 
choose  its  adoption  or  rejection.  It  is  part  of  the  capital  of  society,  having 
all  its  characteristics,  being  the  produce  of  previous  labour,  and  multiply- 
ing the  original  investment  by  that  economy  of  future  labour  which  is  tho 
result  of  the  skill  and  science  so  acquired.  Truth  and  consistency  require, 
tl^refore,  that  the  political  economist  should  not  neglect  the  consideration 
of  this  great  and  influential  portion  of  public  wealth.  How  inconsistent,foi- 
instance,  to  bestow  the  name  of  capital  upon  the  time  and  money  invested 
in  the  machine,  but  deny  it  to  perhaps  the  same  amount  of  time  and 
money  invested  in  that  skill  upon  which  alone  the  value  of  the  machine 
depends.  'In  paying  the  wages  of  skill  and  science,  Ave  not  only  acknow- 
ledge tlie  existence  of  such  a  capital,  but  we  estimate  its  amount  by  pay- 
ing in  proportion  to  the  time  and  expenses  required  for  its  attainment— as 
in  the  case  of  the  physician,  the  lawyer,  the  painter,  &c.  Besides,  so  far  as 
scientific  principles  are  a  question  of  practical  expediency,  it  may  be  ob- 
served that  these  are  views  favourable  to  moral  and  intellectual  improve- 
ment— they  give  to  education  a  new  and  desired  value,  placing  it  on  a  level 
with  a  monied  capital — they  elevate  the  artist,  the  scholar,  and  the  man  of 
science  in  the  scale  of  society — and  by  placing  more  completely  within  the 
reach  of  every  young  man  the  materials  of  future  usefulness,  respecta- 
bility and  wealth — become  the  strongest  incentive  to  pursue  them. — Sav, 
book  II.  ch.  7 ;  book  I.  ch.  4.~E. ' 


yO  luLiriCAL    ELO.NOMV. 

Kmpioymcnt  lisiiecl  uiid  civilizcd  country,  it  will  be  found  that  there  are  verv 
apita-  (Q^y  ^^.^^  ^^^^  j^g  carried  on  by  the  mere  employment  of  the  lin- 
gers, or  tools  with  which  man  is  furnished  by  nature.  It  is  al- 
most always  necessary  to  provide  ourselves  with  the  results  of 
previous  industry,  and  to  strengthen  our  feeble  hands  by  arming 
them,  if  we  may  so  speak,  "  with  the  force  of  all  the  ele- 
ments." 
iU,  It  save?  In  the  second  place,  the  employment  of  capital  not  only  ena- 
Production  bles  US  to  produce  many  species  oi  commodities  that  never 
of  Comraodi- could  have  been  produced  without  its  co-operation,  but  it  also 
enables  us  to  save  labour  in  the  production  of  many  others,  and, 
by  lowering  their  price,  brings  them  within  the  reach  of  a  far 
greater  number  of  consumers.  We  have  been  so  long  accus- 
tomed to  make  use  of  the  productive  sources  of  the  most  pow- 
erful machines,  that  it  requires  a  considerable  effort  of  abstrac- 
tion to  render  ourselves  fully  aware  of  the  real  extent  of  the 
advantages  we  derive  from  them.  But  if  we  compare  the  state 
of  the  arts  practised  alike  by  civilized  man  and  the  savage,  we 
cannot  fail  to  be  convinced  that  it  is  to  the  use  and  employment 
of  fixed  capital  that  we  owe  a  very  large  proportion  of  our  su- 
perior comforts  and  enjoyments.  Consider  the  advantages 
which  man  has  derived  from  the  employment  of  the  lower  ani- 
mals, which,  in  an  economical  point  of  view,  are  regarded  only 
as  machines  !  Consider  the  advantages  that  have  been  derived 
from  the  formation  of  roads,  bridges,  harbours,  and  canals* — the 

*  As  the  subject  of  canals  is  not  taken  up  by  our  author,  this  incidental 
mention  may  justify  some  observations  in  regard  of  them,  with  especial 
reference  to  those  of  our  own  state. 

The  superior  facility  of  transportation  on  a  canal  constitv\tes  its  national 
value.  The  society  is  a  gainer  by  the  amount  of  all  the  surplus  labour 
that  was  previously  required.  The  wealth  of  society  lies  in  the  cheapness 
of  products,  its  interests,  therefore, lie  in  reducing  the  costs  of  production  and 
the  expenses  of  transportation  to  the  lowest  possible  amount.  These  prin- 
ciples, however,  are  obvious.  What  follows  has  not  been  so  generally  ac- 
knowledged. It  is  that  none  are  injured  by  it,  except  temporarily  by  some 
change  of  industry,  while  all  are  eventually  benefited  by  it  through  the 
extended  demands  created  for  products  of  every  kind,  arising  out  of  the  Li- 
creasing  wealth  of  society. 

Thus  the  operation  of  the  great  Western  Canal  of  this  state  was  greatly 
dreaded  by  the  farmers  of  Long  Island  and  along  the  baaks  of  the  Hudson, 
ii-om  the  belief  that  it  would  greatly  reduce  the  value  of  their  products  by 
supplying  grain  at  a  much  cheaper  rate,  and  to  an  indefinitely  great  amount. 

Their  fears  of  ruin,  experience  has  shown  to  be  groundless,  and  the  re- 
sult leads  us  to  perceive  two  erroneous  opinions  on  which  their  anticipatioa 
of  it  was  founded.  * 

1.  That  the  price  of  grain  would  be  materially  reduced  by  the  new  sufS- 
ply.  Had  the  city  of  New-York  been  the  real  market,  it  doubtless  would  ; 
the  price  would  have  fallen  with  the  increased  supply.  But  their  real 
market  is  the  whole  world,  so  far  as  commerce  has  connected  the  various 
nations  of  it.  New- York  is  but  the  entrepot  where  it  rests  compara- 
tively but  a  moment ;  and  whatever  influence  the  increased  quantity  may 
have  in  the  reduction  of  prices,  is  felt  equally,  wherever  the  grain  has  free 
access,  by  the  farmers  of  France  and  Italy,  as  well  as  by  those  of  Long 
Island  and  Dutchess  County. 

2.  That  they  have  not  foreseen  the  superior  profits  of  the  new  applica- 
tions of  land,  demanded  by  the  extended  Avealth  and  population  of  the  city. 
The  farms  of  Long  Island  are  comparatively  turned  into  gardens,  and  this 
not  by  being  driven  from  their  old  employment,  but  by  the  superior  tempta- 
tions of  the  new — fruit  and  vegetables  gradually  taking  the  place  of  butter 
and  grain,  and  thus  creatina:  a  new  demand  lor  land  of  the  next  grade  of 


fomiCAL    ECONOMY.  <j  I 

etfect  tliey  have  had  in  faciUtating  the  conveyance  of  commodi-  Erapioymem 
ties,  and  consequently  in  distributing  them  most  advantageously,  "*"  ^'^P'*"'- 
and  in  reducing  their  price  to  the  consumer  !  Consider  the  ad-   . 
vantages  that  have  been  derived  from  the  construction  of  ships,- 
and  the  improvement  of  navigation  !   But  it  is  in  vain  to  attempt  ^ 

even  to  glance  at  the  numberless  benefits  which  the  employment 
of  the  fixed  capital  vested  in  tools  and  other  instruments,  has 
conferred  on  society,  by  cheapening  and  multiplying  necessaries, 
conveniences,  and  luxuries.  It  is  by  their  means  that  our  fields 
are  cultivated,  our  houses  constructed,  our  clothes  manufactu- 
red, our  ships  built,  and  the  treasures  of  knowledge  and  of  art 
transferred  from  one  hemisphere  to  another  !  If  we  consult  the 
history  of  the  human  race — if  we  trace  their  slow  and  gradual 
advancement  from  barbarism  to  refinement,  we  shall  be  convin- 
ced that  their  progress  from  their  lowest  and  most  abject,  to 
their  highest  and  most  polished  state,  has  been  always  accompa- 
nied, and  chiefly  promoted,  by  the  accumulation  of  fresh  ca- 
pital, and  the  invention  and  improvement  of  tools  and  engines. 

The  third  advantage  derived  from  the  employment  of  capital  Sd.UcimUcs 
consists  in  the  circumstance  of  its  enabling  us  to  execute  work  wo^if  Better 
better,  as  well  as  more  expeditiously  than  it  could  be  done  with-  as  wcii  as 
out  it.  Cotton,  for  example,  might  be  spun  by  the  hand  ;  but  uousiy."^'^  ' 
the  admirable  machinery  invented  by  Hargreaves,  Arkwright, 
and  others,  has  not  only  enabled  us  to  spin  an  hundred  or  a  thou- 
sand times  as  great  a  quantity  of  yarn  as  could  be  spun  by  means 
of  a  common  spindle,  but  it  has  also  improved  its  quality,  and 
given  to  it  a  degree  of  finenes's,  and  of  evenness,  or  equality,  in 
its  parts,  which  was  never  previously  attained.  It  would  require 
a  painter  months,  or  it  might  be  years,  to  paint  with  a  brush 
the  cottons,  or  printed  cloths  used  in  the  hanging  of  a  single 
room  ;  and  it  would  be  very  diflicult,  if  not  impossible,  for  the 
best  artist  to  give  the  same  perfect  identity  and  sameness  to  his 
figures  that  is  given  to  them  by  the  admiralsle  machinery  now  in 
use  for  that  purpose.  Not  to  mention  the  other  and  more  im- 
portant advantages  of  which  the  invention  of  moveable  type^ 
and  printing  has  been  productive,  it  is  certain  that  the  beauty 
of  the  most  perfect  manuscript — one  on  which  years  of  patient 
and  irksome  labour  have  been  expended — is  unable,  in  point  of 
delicacy  and  correctness,  to  match  a  well  printed  work,  execu- 
ted in  the  hundredth  part  of  the  time,  and  at  a  hundredth  part 
of  the  expense  required  to  copy  the  manuscript.  The  great 
foreign  demand  for  English  manufactured  goods  results  no  less 

contiguity.  This  position  may  further  be  illustrated  in  the  history  of  the 
supply  of  fat  cattle  for  the  New- York  market.  A  century  ago,  they  were 
raised  on  farms  adjoining  the  city.  They  are  now  principally  i-aised  three 
hundred  miles  from  it ;  driven  back  step  by  step,  through  the  superior  pro- 
fitableness of  the  new  crops  demanded  by  the  increasing  extent  and  trade  of 
the  metropolis. 

On  this  subject  the  following  extract  from  Adam  Smith  bears  so  point- 
edly as  to  merit  quotation,  "  It  is  not  more  than  fifty  years  ago  that  some 
of  the  counties  in  the  neighbourhood  of  Loudon,  petitioned  the  parliament 
against  the  extension  of  the  turnpike  roads  into  the  remoter  counties. 
These  remoter  counties,  they  pretended  from  the  cheapness  of  labour,  would 
be  able  to  sell  their  grass  and  corn  cheaper  in  the  London  market  than 
themselves,  and  would  thereby  reduce  their  rents,  and  ruin  their  cultiva- 
tion. Their  rents,  however,  have  risen  and  their  cultivation  improved 
since  that  time." — (Wealth  of  Nations»book  I.  eh,  11. — E. 


82  POLITICAL    ECONOMY. 

Employment  fi'oni  llie  Superiority  of  the  manufacture,  than  from  their  greater 
of  Capital,    cheapness  ;  and  for  both  tliese  advantages  we  are  principally 

'  indebted  to  the  excellence  of  our  machinery.* 
The  Power  ,  There  are  other  considerations  which  equally  illustrate  the 
Labo'{l?dJ-  extreme  importance  of  the  accumulation  and  employment  of 
AmountVt'"'  capital.  The  produce  of  the  labour  of  a  nation  cannot  be  in- 
Cajntai.  creased  otherwise  than  by  an  increase  in  the  number  of  labour- 
ers, or  by  an  increase  in  the  productive  powers  of  the  existing 

*  The  talent  of  America  has  contributed  its  full  share,  by  the  improve- 
ment of  machinery,  to  this  augmentation  of  wealtli,  which  belongs  not  to 
one  country  only,  but  to  the  whole  civilized  world.  On  this  point  the  in- 
genuity of  an  intelligent  and  restless  people  seems  to  have  equalled  the 
power  of  the  more  regular  and  scientific  training  of  the  workmen  of  Eu- 
rope. Among  these  may  be  mentioned  as  prominent  instances,  Whittemore's 
machine  for  the  manufacture  of  wool  cards  ;  the  Philadelphia  machine  for 
making  wood  screws  ;  Whitney's  for  the  manufacture  of  arms,  which  last 
illustrates  a  further  point  of  economy  in  the  results  of  machinery,  viz.  the 
perfect  similarity  of  the  identical  parts,  by  which  they  are  capable  of  end- 
less combination  ;  Whitney's  machine  for  jinning  cotton,  or  clearing  it  of 
its  seed;  and  the  various  applications  of  steam  to  the  propelling  of  boats. 

Of  the  increase  of  national  wealth,  arising  from  Whitney's  cotton  ma- 
chine, some  idea  may  be  formed  from  the  rapid  change  produced  by  it  iu 
the  quantity  of  cotton  grown  and  exported,  the  upland  species  of  which, 
imtil  this  happy  invention,  was  almost  wholly  without  value. 

Cotton  exported  from  the  United  States  in  1790,     -         -       100,000  lbs. 

'•  "  "  1795,         -  1,300,000   '• 

"  "  1800,         -        17,789.803   '■ 

"  1804,         -       35,034,175    '• 

'•  '•  1817,         -       85,649,328    '• 

Yet  this  was  the  article,  eight  bags  of  which,  were  refused  entry  into 
the  port  of  Bristol  in  1784,  on  the  grountf  that  the  United  States  raised  no 
cotton. 

To  attempt  an  illustration  of  the  national  saving  arising  from  transporta- 
tion by  steam,  wovtld  be  entering  into  too  large  a  field.  As  a  single  item 
of  it,  there  may  be  fairly  calculated  an  annual  national  gain,  of  at  least  half 
a  million  of  dollars,  arising  out  of  time  saved,  in  the  intercourse  between 
New-York  and  the  banks  of  the  Hudson. 

In  a  country  like  this,  where  labour  is  dear  and  capital  comparatively 
cheap,  the  value  of  labour-saving  machinery  must  be  doubly  great.  Wher<? 
on  the  contrary,  there  is  a  dense  population,  cheap  support,  and  high 
profits  of  capital,  as  in  India  for  instance,  the  national  saving  would  be 
small  ;  and  might  from  the  influence  of  these  causes  altogether  disappear, 
leaving  the  wages  saved  but  a  mere  balance  to  the  interest  on  the  capital 
invested  in  machinery. 

The  value  and  influence  of  labour-saving  machinery,  is  a  question  of 
great  interest,  though  of  less  difficulty  in  its  solution  in  this  country  than 
in  Europe.  The  general  principles  on  which  it  is  to  be  determined  may 
thus  be  stated : — 

The  national  value  of  machinery  consists  in  substituting  a  natural  agent 
for  human  labour ;  its  economy  lies  in  the  balance  between  the  interest 
of  the  capital  invested  in  the  machine  including  repairs,  and  the  Avages  of 
the  labour  saved.  The  nation  is  the  gainer  by  all  such  difference — its 
wealth  being  advanced  in  consequence  of  obtaining  the  same  products  at  a 
less  cost. 

The  influence  of  such  machinery  on  the  comforts  of  the  lower  class,  is  a 
point  more  questioned.  In  Europe,  labourers  have  always  violently  risen 
against  its  introduction,  as  feeling  their  interests  invaded. 

To  give  precision  to  this  inquiry,  it  should  be  distinguished  into  the  tem- 
1         porary  and  final  effects  of  machinery  ;  and  that  in  regard  of  all  upon  whom 
it  can  operate,  viz.  upon  the  labourers  themselves,  upon  the  manufacturer 
or  owner  of  the  machine,  and  upon  the  public  consumers. 

1.  Workmen. — Upon  this  class  the  immediate  but  temporary  eflect  is 
want  of  employment,  and  consequent  distress  ;  thus  Arkwright's  spinning 
machinery  remlered  needless  nineteca-tweutieths  of  the  workmen  before 


POLITICAL    ECOiVOMY.  8.3 

labourers.  But  without  an  incroase  of  capital  it  is  in  most  cases  Einpioymcut 
impossible  to  employ  another  workman  with  advantage.  If°  ''^' 
capital  be  not  augmented,  and  if  the  food  and  clothes  destined 
for  the  support  of  the  labourers,  and  the  tools  and  machines 
with  which  they  arc  to  operate,  be  all  required  for  the  mainte- 
nance and  efficient  employment  of  the  labourers  in  existence  at 
'any  given  period,  there  can  be  no  additional  demand  for  them. 
In  such  circumstances,  the  rate  of  wages  cannot  rise  ;  and  if 
the  number  of  inhabitants  are  increased,  they  must  be  worse 
provided  for.  Neither  can  the  productive  powers  of  the  la- 
boiwer  be  augmented,  without  a  previous  increase  of  capital. 
It  is  only  by  a  better  education  and  training  of  workmen,  by  a 
greater  subdivision  of  their  employments,  or  by  an  improve- 
ment of  machinery,  that  their  productive  powers  can  ever  be 
materially  increased.  But  in  almost  all  these  cases,  an  additional 
capital  is  required.  It  is  only  by  means  of  an  additional  capi- 
tal that  the  workman  can  be  better  trained,  or  that  the  underta- 
ker of  any  work  can  either  provide  his  workmen  with  better 
machinery,  or  make  a  more  proper  distribution  of  employment 
among  them.  When  the  work  to  be  done  consists  of  a  number 
of  parts,  to  keep  every  man  constantly  employed  in  one  particu- 
lar part,  requires  a  much  larger  stock  than  where  every  man  is 
occasionally  employed  in  every  different  part  of  the  work. 
"When,"  says  Dr.  Smith,  "we  compare  the  state  of  a  nation 
at  two  different  periods,  and  find  that  the  annual  produce  of  its 
land  and  labour  is  greater  at  the  latter  than  at  the  former,  that 
its  lands  are  better  cultivated,  its  manufactures  more  numerous 
and  more  flourishing,  and  its  trade  more  extensive,  we  may  be 
assured  that  its  capital  must  have  increased  during  the*interval 
between  these  two  periods,  and  that  more  must  have  been  added 
to  it  by  the  good  conduct  of  some,  than  had  been  taken  from  it, 
either  by  the  private  misconduct  of  others,  or  by  the  public  ex- 
employed.  The  final  efTect  is  a  reabsorption  of  them  into  the  same  business, 
which  is  extended  in  proportion  to  the  cheapness  of  the  price  of  the  com- 
modity. An  illustration  of  which  may  also  be  found  in  the  same  cotton 
machinery,  which  twenty-five  years  after  its  adoption  gave  occupation  to  at 
least  five  times  the  numljer  of  workmen  before  employed. 

2.  The  manufacturer. — If  the  improvement  be  a  secret  or  a  monopoly, 
which,  for  a  short  time  at  least,  it  always  is,  the  manufacturer  by  selling  at 
old  prices  while  he  is  fabricating-  at  a  diminished  cost,  secures  great  profits, 
and  perhaps  realizes  a  large  fortune.  The  final  benefit,  however,  is  not 
his  ;  for  no  sooner  is  the  secret  known,  or  the  machine  open,  than  com- 
petition brings  down  his  profits  to  the  ordinary  rate  of  the  returns  of 
<apital. 

3.  The  public  consumers. — So  long  as  the  products  of  the  machine  are 
sold  at  the  old  prices,  the  interests  of  the  public  continue  the  same.  But  as 
soon  as  monopoly  ceases,  its  profits  may  be  said  to  be  shared  among  the 
consumers — the  price  of  the  article  falls  to  its  real  cost  of  production — the 
demand  extends  with  its  cheapness — the  old  consumers  are  the  gainers  by 
liaving  the  same  commodity  at  a  cheaper  rale,  and  the  new  consumers  are 
the  gainers  by  being  enabled  to  enjoy  an  additional  comfort,  from  which 
they  were  before  excluded. 

Thus  it  appears,  to  sum  up  the  eflfects  of  the  introduction  of  labour-saving 
machi»ery,  that  labourers  are  the  temporary  sufferers — manufacturers  the 
transitory  gainers — but  the  public,  and  more  especially  the  poor,  are  those 
who  are  i-eally  and  permanently  benefited.  The  stocking  weaver  is  enabled 
to  wear  stockings  through  the  influence  of  that  very  machine  which,  at  first 
perhaps,  he  joined  in  a  riot  to  destroy.  On  the  subject  of  machinery,  see 
Adam  Smith,  book  I.  ch.  1.  Say,' book  I.  ch.  7  and  8.  Ricardo,  ch.  31. 
V.  Americfin  R-^vicw.  No.  35.  Quarterly  Review,  Vol.  XIX.  p.  195. — E. 


34  POLITICAL    ECONOMV. 

Kmpioymcnt  travagance  of  the  government." — {Wealth  of  Nations,  Vol.  11. 
of  Capital,     p^  23^     i^  ig^  therefore  apparent,  that  no  country  can  ever 
reach  the  stationary  state,  so  long  as  she  continues  to  accumu- 
late additional  capital.     While  she  does  this,  she  will  always 
have  a  constantly  increasing  demand  for  lahour,   and  will  be 
constantly  augmenting   the  mass  of  necessaries,  luxuries,  and 
conveniences,  and,  consequently,  also  the  numbers  of  her  peo- 
ple.    But  with  every  diminution  of  the  previous  rate  at  which 
capital  had  been  accumulating,  the  demand  for  labour  will  de- 
cline. When  no  additions  are  made  to  its  stock,  no  more  labour 
will  be,  or,  indeed,  can  be  employed.     And  should  the  national 
capital  be  diminished, the  condition  of  the  great  body  of  the  people 
would  be  greatly  deteriorated — for  the  wages  of  labour  would 
be  reduced,  and  pauperism,  with  all  its  attendant  train  of  vice, 
misery,  and  crime,  would  spread  its  ravages  throughout  the  lar- 
gest portion  of  society.* 
Accumuia-        Having  thus  endeavoured  to  point  out  the  vast  importance  of 
tion  of  Ca-  the  employment  of  capital,  and  the  manner  in  which  it  co-ope- 
'"  °"  rates  in  facilitating  production,  we  shall,  proceed  to  explain  the 

circumstances  most  favourable  for  its  accumulation.  Now,  as 
capital  is  nothing  more  than  the  accumulated  produce  of  pre- 
A'ious  industry,  it  is  evident  its  increase  will  be  most  ra- 
pid where  industry  is  most  productive,  or,  in  other  words, 
Advantage  of  where  the  profits  of  stock  are  highest.]  The  man  who  can 
High  Profits,  produce  a  bushel  of  wheat  in  three  days,  has  it  in  his 
power  to  accumulate  twice  as  much  as  the  man  who,  either 
from  a  deficiency  of  skill,  or  from  his  being  obliged  to  cul- 
tivate a  bad  soil,  is  forced  to  labour  six  days  to  produce  the 
same  quiantity  ;  and  the  capitalist  who  can  invest  stock  so  as  to 
vield  him  a  profit  of  ten  per  cent,  has  it  equally  in  his  power  to 

*  From  this  state  of  worthlessness  and  vice,  there  is  but  one  remedy, 
viz.  freedom — not  political  but  economical :  freedom  of  labour,  freedom  of 
trade,  freedom  of  emigration.  The  state  of  things  described  in  the  text, 
is  a  frequent  but  unnatural  one,  and  always  brought  on  by  some  interfe- 
rence with  the  wise  and  benevolent  laws  of  nature,  which,  if  left  to 
their  own  free  operation  under  the  protection,  not  guidance,  of  regular  and 
peaceful  governments,  would  postpone  indefinitely  the  period  of  such  ca- 
lamity. Among  the  causes  of  these  economical  convulsions,  as  tliey  may 
be  termed,  war  unquestionably  is  one  of  the  chief,  and  one  perhaps  not  al- 
ways to  be  avoided.  It  is,  however,  a  great  point  gained  to  establish  a  pa- 
cific policy  as  is  now  done  on  tlie  principles  of  science  ;  it  cuts  off  the  pre- 
tence for  many  wars,  and  affords  the  strongest  argument  against  all. 

On  this  subject,  the  language  of  the  late  Dean  Tucker  as  elsewhere 
quoted  by  our  author,  is  peculiarly  strong  and  just. 

"  A  commercial  war  whether  crowned  with  victory  or  branded  with  de- 
feat, can  never  prevent  another  nation  from  becoming  more  industrious 
than  you  are  ;  and  if  they  are  more  industrious,  they  will  sell  cheaper,  and 
<!onsequeiitly  your  customers  will  leave  your  market  and  go  to  theirs. 
This  will  happen,  though  you  covered  the  ocean  with  fleets  and  the  land 
with  armies.  The  soldier  may  lay  waste,  the  privateer  whether  success- 
ful or  unsuccessful  will  make  poor,  but  it  is  the  eternal  law  of  Providence, 
that  the  hand  of  the  diligent  can  alone  make  rich. 

See  Four  Tracts  on  Commercial  and  Political  Subjects,  by  Dean  Tucker. 
See  also,  the  subject  incidentally  but  conclusively  stated  in  Lowe's  "  Pre- 
sent State  of  England."  London,  1821.  Reprint,  New-York,  1824.  N. 
American  Review,  No.  28,  Privateering. — E. 

+  To  avoid  all  chance  of  misconception,  it  is  necessary  to  observe,  that 
this  refers  to  nell  profit,  or  to  the  sum  whicli  remains  to  the  capitalist  after 
all  his  outgoings  are  compensated,  including  therein  a  sum  sufficient  to  en- 
sure liis  capital  against  risk,  and  to  make  up  for  whatever  may  be  peru- 
iinrlv  disagreeable  in  hi"  businp'= 


POLITICAL   ECONOaV.  85 

accumulate  twice  as  fast  as  the  capitalist  %vho  can  only  obtain  Accumu^a- 
five  per  cent,  for  his  capital.     Conformably  to  this  statement,  it  pUai. 
is  found  that  the  rale  of  profit,   or,  which  is  the  same  thing, 
that  the  power  to  accumulate  capital,  is  always  greatest  in  those 
countries  which  are  most  rapidly  augmenting  their  wealth  and 
population.    The  rate  of  profit,  or  the  power  to  employ  labour 
and  capital  with  advantage,  is  ordinarily  twice  as  great  in  thr^ 
United  States  as  in  Great  Britain  or  France  ;  and  it  is  to  this 
that  the  more  rapid  advancement  of  the  former  in  wealth  and 
population  is  entirely  to  be  ascribed.     We  do  not  mean  to  say 
that  high  profits  are  necessarily,  and  in  every  instance,  accom- 
panied by  a  great  degree  of  prosperity.     Countries  with  every 
possible  advantage  for  the   profitable  employment  of  industry 
and  of  stock,  may  be  subjected  to   a  despotical  government. 
which  does  not  respect  the  right  of  property  ;  and  the  want  of 
adequate  security  resulting  from  this  circumstance  may  be  of 
itself  sufficient  to  paralyse  all  the  exertions  of  those  who  are 
otherwise  placed  in  the  most  favourable  situation  for  the  accu- 
mulation of  capital  and  of  wealth.*     But  we  have  no  hesitation 
in  laying  it  down  as  a  principle  which  holds  good  in  every  case, 
and  from  which  there  is  really  no  exception,  that,  if  the  govern- 
ments of  any  two  or  more  countries  be  equally  liberal,  and  propertij 
in  each  equally  well  secured,  their  comparative  jtrosperity  will  de- 
pend on  the  rate  of  profit.     Wherever  profits  are  high,  there  is 
a  great  demand  for  labour,  and  the  society  rapidly  augments 
both  its  population  and  its  riches.    On  the  other  hand,  wherever 
they  are  low,  the  demand  for  labour  is  proportionably  reduced, 
and  the  progress  of  society  rendered  so  much  the  slower. 

But  however  high  the  rate  of  profit,  it  is  evident,  that,  if  men  parsimunv 
had  always  lived  up  to  their  incomes, — that  is,  if  they  had  always  accuS- 
consumed  the  whole  produce  of  their  industry  in  the  gratifica-  tion. 
tion  of  their  immediate  wants  and  desires,  there  could  have 
been  no  such  thing  as  capital  in  the  world.     High  profits  are 
advantageous,  because  they  afford  the  means  of  amassing  capi- 
tal ;  but  something  more  is  necessary  to  induce  us  to  make  use 
of  these  means,  and  this  is  the  accumulating  principle.^     The 

^  The  answer  given  to  this  objection,  is  not  as  clearly  stated  as  it  miglit 
have  been. 

Profits,  like  interest,  are  similarly  afiected  by  opposite  causes.  They  arc 
raised  by  whatever  tends  to  render  the  returns  of  capital  great.  They  are 
raised  also  by  whatever  tends  to  render  them  insecure.  Again,  they  are 
lowered  by  whatever  tends  to  check  prosperity.  They  are  also  lowered 
by  whatever  tends  to  give  security. 

The  simple  fact  of  high  profits,  does  not,  therefore,  furnish  sufficient  data 
for  estimating  the  existing  state  of  prosperity.  They  may  be  high  from  a  bad 
government — they  may  be  high  from  a  good  trade  ;  the  former  is  exem- 
plified in  Turkey— the  latter  in  the  United  States.— See  Edin.  Review, 
Vol.  XL.,  Note  on  Interest,  p.  59.— E. 

t  Whether  industry  or  economy  be  the  operative  principle  upon  whicli 
the  formation  of  capital  depends,  is  a  point  on  which  there  exists  among 
writers  a  needless  difiierence  of  opinion.  Adam  Smith  says,  that  it  is  due 
to  economy  not  industry.  Lauderdale  asserts,  that  wealth  can  be  increa- 
sed by  that  only  which  originally  produced  it,  and  that  is  labour  ;  while 
Ganihl  sides  with  Smith, "  Capitals  are  always  derived  from  economy  and 
can  neither  be  formed  nor  increased  otherwise."  It  is,  however,  an  idle 
dispute — both  are  evidently  necessary ;  without  labour,  there  will  be  no 
fund  for  economy  to  be  exercised  upon,  and  without  economy  that  fund 
will  be  dissipated  in    present    gratification.       As   h   practical   qncstinn. 

It 


&6  POLITICAL    ECONOMY. 

Accumuia-  dcsire  implanted  in  the  breast  of  every  individual  of  rising  iu 
p'iiaL  ''  the  world,  and  improving  his  condition,  has  prompted  mankind 
to  save  a  portion  of  their  income,  or  of  the  produce  of  their 
industry ,  from  immediate  consumption,  and  to  setit  apart  as  a  fund, 
or  capital,  for  the  support  of  additional  workmen.  It  is  to  this 
principle,  therefore, or  rather  to  its  effect, pa rsimotiy,  that  we  owe 
capital  ;  and  it  is  to  capital  that  we  owe  almost  all  our  comforts 
and  enjoyments.  Without  its  assistance  and  co-operation,  la- 
bour could  never  have  been  divided  ;  arts  could  never  have 
made  any  progress  ;  and  mankind  must  have  continued  to  shel- 
ter themselves,  as  in  the  earli.  st  ages,  in  caves  and  forests,  and 
to  clothe  themselves  with  the  skins  of  wild  animals.  All  the  ac- 
cumulated riches  of  the  world — the  cities  which  cover  its  sur- 
face— the  ships  which  traverse  its  seas — and  all  the  innumera- 
ble variety  of  improvements,  owe  their  origin  to  this  princi- 
ple,— to  the  desire  to  rise  in  the  world,  and  consequently,  to 
save  and  amass. 

It  has  been  wisely  ordered,  that  this  principle  should  be  as 
powerful  as  it  is  advantageous.  "  With  regard  to  profusion," 
says  Dr.  Smith,  "  the  principle  which  prompts  to  expense  is  the 
desire  of  present  enjoyment  ;  which,  though  sometimes  violent, 
and  very  difficult  to  be  restrained,  is  in  general,  only  momenta- 
ry and  occasional.  But  the  principle  which  prompts  to  save  is 
the  desire  of  bettering  our  condition  ;  a  desire  which,  though 
generally  calm  and  dispassionate,  comes  with  us  from  the  womb, 
and  never  leaves  us  till  we  go  into  the  grave.  In  the  whole  in- 
terval which  separates  these  two  moments,  there  is  scarce,  per- 
haps, a  single  instance  in  which  any  man  is  so  perfectly  and 
completely  satisfied  with  his  situation,  as  to  be  without  any  wish 
of  alteration  or  improvement  of  any  kind.  An  augmentation 
of  fortune  is  the  means  by  which  the  greater  part  of  men  pro- 
pose and  wish  to  better  their  condition.  It  is  the  means  the 
most  vulgar  and  the  most  obvious  ;  and  the  most  likely  way  of 
augmenting  their  fortune  is  to  save  and  accumulate  some  part 
of  what  they  acquire,  either  regularly  and  annually,  or  upon 
some  extraordinary  occasions.  Though  the  p  inciple  of  ex- 
pence,  therefore,  prevails  in  almost  all  men  upon  some  occa- 
jiions,  yet  in  the  greater  part  of  men,  taking  the  whole  course 

however,  and  one  to  be  tested  by  experience,  economy  would  carry  tlic 
palm.  Among  the  poor  we  find  many  wlio  are  laborious  yet  thriftless 
and  unsuccessful,  while  the  truly  economical  rarely  miss  of  their  reward. 
Economy,  it  must  be  remembered,  however,  is  a  relative  term,  having  re- 
lerence  to  income  and  expenditure,  and  implying  a  surplus  of  the  former 
wver  the  latter.  He  is  not  economical  in  the  scientific  sense  of  the  term, 
who  lives  up  to  his  means,  however  small  they  may  be  ;  and  he  will  surely 
become  rich,  at  least  in  its  best  acceptation  of  independence,  who  will  en- 
ter early  and  persevere  steadily  in  the  course  of  this  wise  economy. 

In  this  country  of  high  wages,  that  wealth  wliich  gives  independence  is 
in  the  power  of  every  young  man  setting  out  in  life :  as  our  author  has  be- 
fore observed  "  ce  n\sf  que  le  premier  pas  qui  cvutc.'"  In  the  first  step  lies 
all  the  difficulty — let  him  but  set  out  right,  and  the  victory  is  gained.  Col- 
quhoun  in  his  "  Police  of  London,"  remarks,  that  he  never  knew  an  ap- 
prentice who  saved  money  during  the  first  six  months  of  his  freedom,  who 
did  not  succeed ;  and  rarely  knew  one  wlio  did,  who  at  the  end  of  the 
same  period,  had  run  himselt  in  debt.  See  Edin.  Rev.  Mendicity,  No  55. 
Art.  1.  Saving  Banks,  No.  45,  Art.  6.  Quarterly  Review,  Saving  Banks, 
Vol.  XII.  p.  153.  XVI.  fid.  XVIII.— J?. 


POLITICAL    ECONOMV.  87 

of  their  lite  at  an  average,  the  principle  of  frugality  not  only  Accumuio- 
predominates,  but  predominates  very  greatly.''^— (Wealth  of  JVa-  '\"""*  ^'^' 
tio7is,  Vo\.  II.  p.  19.) 

It  is  this  principle  which  carries  society  forward.  The  spirit 
of  parsimony,  and  the  efforts  which  the  frugal  and  industrious 
classes  make  to  improve  their  condition,  in  most  instances 
balance  not  only  the  profusion  of  individuals,  but  also  the  more 
wasteful  profusion  and  extravagance  of  governments.  The 
spirit  of  economy  has  been  happily  compared  by  Smith  to  the 
unknown  principle  of  animal  life — the  vis  medicatrix  naturce, — 
which  frequently  restores  health  and  vigour  to  the  constitution, 
in  spite  both  of  disease  and  of  the  absurd  prescriptions  of  the 
physician. 

We  must  have  a  care,  however,  lest  we  fall  into  the  error  of  E»:pcn'i't"r'> 
supposing,   as  Mr.  Malthus  and  many  others   have  done,  that  men"  m" a 
public  expenditure  is  a  cause  of  individual  accumulation.*     Its  ^='"^*' "' 
effect  is,  in  every  instance,  distinctly  and  completely  the   re- tiOT."™" '^ 
verse.    The  more  government  spends,  the  less  remains  for  indi- 
viduals to  save.     Necessity  may  compel  a  man  to  exert  himself 
to  pay  heavy  taxes  ;  but  it  is  choice,  and  not  necessity,  v.'hich 
makes  him  withdraw  a  portion  of  the  produce  of  his  industry 
from  immediate  consumption,  and  employ  it  as  a  stock.     This 
distinction  must  be  kept  constantly  in  view.     It  cannot  be  deni- 

*  Of  all  sophisms  in  Political  Economy,  this  is  the  most  dangerous.  It 
lies  at  the  basis  of  abuse  of  power,  on  the  part  of  government,  in  impo- 
sing taxes  and  waste  of  wealth  in  disbursing  them.  This  is  an  evil,  how- 
ever, which  rests  not  as  yet,  upon  our  nation.  Great  profits  and  cheap 
government  make  our  public  burthens  light ;  bu(  what  limit  would  there 
be  to  them,  should  the  very  virtue  of  our  legislators  be  turned  agauist  us, 
by  assuming  this  fallacious  principle  of  the  expenses  of  government  teirio- 
an  exciting  cause  of  national  wealth.  Ip 

A  popular  error  analogous  to  this  may  here  be  mentioned.  It  is  that  of 
regarding  public  expenditure  not  mei-ely  as  Malthus  states  it,  a  stimulus  to 
increased  accumulation,  but  as  actually  furnishing  the  sources  of  it;  and 
to  those  who  remember  the  excitement  given  to  the  industry  and  capital 
of  the  country  during  the  late  war,  by  the  lavish  expenditure  of  loans 
made  by  government,  it  will  not  appear  an  opinion  destitute  at  least  of 
plausibility.    It  may  be  worth  while  to  detect  its  fallacy. 

When  the  government  after  making  a  loan,  comes  into  the  market  as  .1 
consumer,  like  every  other  consumer  it  supports  the  productive  industrj- 
of  the  country  to  the  amount  of  its  disbursements.  A  million  expended  by 
the  government,  is  equal  in  its  effects  to  a  million  expended  in  the  country 
by  a  foreign  consumer.  The  only  difference  lies  in  the  source  whence  the 
money  is  derived,  and  the  productive  or  unproductive  manner  in  which  it 
is  expended. 

Now  in  the  case  of  the  foreign  consumer  it  comes  from  abroad  and  i-: 
so  much  added  to  the  wealth  of  the  nation — in  the  latter  case  it  is  part 
of  the  domestic  capital  of  the  country,  which  has  passed  from  the  hands 
of  individuals  into  those  of  the  government.  Tracing  it  one  step  fur- 
ther, we  find  that  it  is  a  portion  of  national  wealth,  which  has  not  onlj- 
changed  hands  but  changed  its  destination  ;  what  before  was  capital  is  now  "  :• 

considered  as  income— what  before  was  productively  invested,  is  now  un- 
productively  consumed,  and  the  sum  of  national  wealth  is  consequently  to 
the  same  amount  diminished.  If  the  amount  so  expended  have  been  raised 
by  tax,  the  diminution  is  immediate  and  sensible — if  by  loan  it  is  gradual 
and  distant ;  but  in  either  case  it  is  a  certain  and  necessary  diminution  of 
the  public  capital ;  and  whatever  be  the  show  of  present  prosperity  it 
produces,  it  is  as  fallacious  in  the  case  of  a  nation,  as  every  one  sees  it 
would  be  in  the  case  of  an  indi\'idual  who  should  by  loan  antedate  his 
means,  or  convert  his  capital  into  income. 

On  this  subject  which  is  too  extensive  and  frnpoilant  to  be  satisiffeftorilv 
treated  of  in  a  note,  see  Say,  book  III..r-h.  8  and  9.  Ricardo,  ch.  G.~E. 


pita 


US  POLITICAL   ECONOMY. 

Acciimuia-  cd  that  it  is  necessity  that  forces  farmers  and  manufacturers  to 
(lonof  Ci-  ggjj  g  portion  of  their  produce  to  pay  the  taxes  to  which  they 
are  subjected  ;  but  when  these  taxes  are  paid,  the  government 
is  satisfied,  and  it  is  plainly  their  own  free  option — their  de- 
!<ire  to  improve  their  condition,  and  to  rise  higher  in  the  world, 
and  not  compulsion,  that  induces  them  to  accumulate  another 
portion  of  their  produce  as  capital.  The  capitals  of  England 
and  of  France  have  not  increased,  because  of  the  vast  expen- 
diture of  their  governments,  but  in  despite  of  it.  Those  who 
continued  to  accumulate,  notwithstanding  the  share  of  their  pro- 
duce taken  from  them  by  government  was  increased,  would  evi- 
dently have  had  greater  means  of  accumulation,  had  this  share 
not  been  increased,  or  increased  in  a  less  proportion.  But 
accumulation,  like  the  other  passions,  increases  as  the  means  of 
gratifying  it  increase.  In  point  of  fact,  the  greatest  accumu- 
lations are  invariably  made  where  there  is  the  greatest  power 
to  accumulate.  There  are  no  internal  taxes  in  America  ;  she 
is  possessed  of  vast  tracts  of  fertile  and  uncultivated  soil  ;  and 
industry  is,  in  consequence  extremely  productive.  And,  agreea- 
bly to  what  we  have  now  stated,  America  doubles  her  capital 
and  population  every  five-and-twenty  years,  and  is  advancing  in 
the  career  of  wealth,  and  civilization  with  a  rapidity  unknown 
in  any  other  country.* 

Ambition  to  rise  is  the  animating  principle  of  society.  Instead 
of  remaining  satisfied  with  the  condition  of  their  fathers,  the 
great  object  of  mankind  in  every  age  has  been  to  rise  above 
it — to  elevate  themselves  in  the  scale  of  wealth.  To  continue 
stationary,  or  to  retrograde,  is  not  natural  to  society.  Man  from 
vouth  grows  to  manhood,  then  decays  and  dies  ;  but  such  is  not 
(h^estiny  of  nations.  The  arts,  sciences,  and  capital  of  one 
g«eration  becomes  the  patrimony  of  that  which  succeeds  them ; 

*  As  Americans,  we  are  indebted  to  Political  Economists  for  the  fairest 
picture  of  our  country.  To  them  the  materials  we  possess  of  national 
wealth  and  greatness,  are  a  subject  neither  of  doubt  nor  of  envy.  Indeed 
1  he  latter  feeling  can  find  no  place  in  the  bosom  of  a  true  economist.  All 
the  principles  of  tlie  science  are  against  it — since  the  prosperity  of  one 
country  diffuses  itself  over  all  with  which  she  holds  intercourse — aflbrding 
io  them  cheaper  productions,  ampler  supplies,  and  larger  markets. 

The  wealth  in  this  way  annually  produced  in  the  world,  is  not  a  pecu- 
liar, but  a  common  heap,  out  of  which  every  nation  takes  in  proportion 
lO  its  industry  and  capital  to  its  moral  and  intellectual  energies.  Herein 
Hicn  consists  the  real  policy  and  interests  of  a  country,  not  in  diminishing 
the  heap  but  in  enlarging  their  own  rightful  share — not  in  checking  tlie 
labour  and  capital  of  other  countries  which  are  working  for  this  common 
fund,  but  in  giving  free  play  and  energy  to  its  own  powers  of  production — 
ui  removing  all  fetters  upon  national  industry  or  private  accumulation — in 
luttingoff  all  needless  government  expenditure,  and  in  giving  to  the  peo- 
ple through  the  medium  of  education  an  intellectual,  and  above  all  a  moral 
;ind  religious  tone  which  forms  not  only  tlic  loftiest  feature  of  a  nation's 
character,  but  the  one  most  favourable  to  the  advancement  of  public  wealtli 
and  permanent  prosperity. 

Blest  as  we  are,  above  all  the  nations  of  the  earth,  witli  an  abundant 
^hare  of  the  materials  upon  which  national  prosperity  depends,  let  it  be 
our  pride  also,  to  set  them  an  example  of  tlie  policy  most  favourable  to 
Iheir  developemcnt,  and  to  sliow  ourselves  worthy  of  that  high  destination 
to  which  under  the  guidance  of  a  wise  providence  we  seem  to  be  called, 
that  of  serving  as  a  model  of  reform  to  the  Old  World,  as  age  and  corrup- 
1  ion  gradually  sap  the  foundations  of  its  early  institutions,  and  as  aprecur- 
Kor  and  guide  to  the  rising  nations  of  the  New.  See  N.  Amer.  Rev.  Statis- 
tics c,  i'United  States;  Nos.  30  and  40,  also  Review  of  Coxe's  Report  on 
Arts  and  Mamilacturo?,  Vol.  1. — E. 


POLTTICAI.    EC0N0M7*  89 

and  in  their  hands,  are  improved  and  augmented,  and  rendered  Accnmaia- 
more  powerful  and  efficient;  so  that,  if  not  counteracted  by  ""^i"*^  ^"^^ 
the  want  of  security,  or  by  other  adventitious  causes,  the  prin- 
ciple of  improvement  would  always  operate,  and  would  secure 
the  constant  advancement  of  nations  in  wealth  and  population. 

It  is  to  this  same  principle  that  we  owe  the  discovery  and 
improvement* of  machinery.  Mankind  have,  in  every  stage  of 
society,  endeavoured  to  increase  their  productive  powers,  and 
to  improve  their  condition,  by  availing  themselves  of  the  assis- 
tance of  natural  agents,  and  making  them  contribute  to  the  per- 
formance of  tasks  which  must  otherwise  have  been  performed 
by  the  hand  only.  The  savage  avails  himself  of  the  aid  of  a 
club  and  a  sling  to  facilitate  the  acquisition  of  game,  and  abridge 
his  labour  ;  and  the  same  principle  which  prompted  him  to  re- 
sort to  and  construct  these  rude  instruments,  never  ceases  to 
operate.  It  is  always  producing  some  new  improvement ;  and 
in  an  advanced  and  refined  period,  gives  us  ships  for  canoes, 
muskets  for  slings,  steam-engines  for  clubs,  and  cotton  mills  for 
distaffs.  "  The  hand  of  man,"  says  Colonel  Torrens,  "is  not 
armed  with  any  efficient  natural  instrument,  such  as  the  beak  of 
the  bird,  or  the  claw  of  the  quadruped,  for  operating  directly 
upon  the  materials  presented  to  him  ;  but  it  is  admirably  adapted 
for  receiving  and  applying  artificial  implements,  and  for  employ- 
ing the  powers  of  one  substance  to  produce  the  desired  changes 
in  another.  Hence  almost  all  the  grand  results  in  manufactu- 
ring industry  are  brought  about  by  means  of  capital.  Throughout 
the  world  there  are  no  very  striking  inequalities  in  the  muscu- 
lar force  by  which  direct  labour  is  performed  ;  and  it  is  mainly 
owing  to  the  differences  in  the  quantity  of  capital,  and  in  the 
skill  with  which  it  is  applied,  that  in  one  country  man  is  found 
naked  and  destitute,  and  that  in  another  all  the  rude  produc- 
tions of  the  earth,  and  all  the  forces  of  nature,  are  made  to  con- 
tribute to  his  comfort,  and  to  augment  his  power." — (On  the  Pro- 
duction of  Wealth,  p.  89.)*' 

Sect.  III. — Diff^erent  Employments  of  Capital  and  Industry — 
Manufactures  and  Commerce  shown  to  be  equally  advantageous 
as  Agriculture — Rate  of  Profit  true  test  of  Individual  and  Pub- 
lic Advantage. 

We  have  in  the  previous  section,  endeavoured  to  show,  that  Different 
(he  increase  and  diminution  of  capital  is  the  srrand  point  on  Empioymen,? 

1  •    I  /•         1  •,      1  ■  ii     ,   -^  ■  f        i.    vyij  ol  Capital 

which  national  prosperity  hinges, — that  if  you  increase  capital,  andindostiy. 

*  The  rapid  advance  of  general  wealth  within  the  last  half  century,  is 
piincipally  due  to  the  introduction  of  machinei-y  and  the  extended  employ- 
ment of  more  and  more  powerful  natural  agents.  A  striking  illustration  of 
their  successive  employment,  and  of  the  successive  additions  of  poAver 
with  which  they  arm,  as  it  were,  the  human  hand,  may  be  found  in  the 
recent  history  of  the  collieries  near  Leeds.  Within  the  memory  of  its  older 
inhabitants  the  coal  was  carried  from  the  pits  to  the  canal  in  paniers  upon 
asses :  to  these  succeeded  wagons  or  carts ;  iron  rail-ways  were  afterward 
resorted  to,  doubling  power  by  the  diminution  of  friction ;  and  finally  a 
steam  wagon  was  made  to  roll  upon  them,  drawing  behind  it  from  eight}"- 
to  a  hundred  tons  of  coal.  How  different  a  being  is  man,  as  to  physical 
force,  in  the  extremes  of  this  chain  of  scientific  improvement.  In  the  first 
by  the  aid  of  a  poor  animal  drawing  little  more  than  he  could  himself  carry 
— in  the  second,  like  some  great  necromancer,  making  the  elements  his  ser- 


90  POLITICAL    ECONOMT. 

Different  you  Instantly  increase  the  means  of  supporting  and  employing 
of'capiTa'i'"*  additional  labour,  and  that  if  you  diminish  capital,  you  instantly 
and  Industry  take  away  a  portion  of  the  comforts  and  enjoyments,  and  per- 
haps also  of  the  necessaries  of  the  productive  classes,  and 
spread  poverty  and  misery  throughout  the  land  ;  and  we  also 
endeavoured  to  show  that  the  increase  and  diminution  of  the 
rate  of  protit  was  the  great  cause  of  the  increase  and  diminu- 
tion of  capital.  If  such  be  the  case,  it  seems  impossible  to  re- 
sist coming  to  tlie  conclusion,  that  those  employments  which 
yield  the  greatest  profit,  or  in  which  in.lustry  is  most  productive, 
are  the  most  advantageous.  But  Dr.  Smith,  Mr.  M-althus,  and 
most  other  political  economists,  have  objected  to  this  standard. 
7" hey  allow  that  if  two  capitals  yield  equal  profits,  the  employ- 
ments in  which  they  are  engaged  are  equally  beneficial  to  their 
possessors ;  but  they  contend,  that,  if  one  of  these  capitals  be 
employed  in  agriculture,  it  will  be  productive  of  greater /jufe^tc 
advantfige.*  We  believe,  however,  that  we  shall  be  able  to  show 
that  this  opinion  rests  on  no  good  foundation  ;  and  that  the  ave- 
rage rate  of  profit  is  the  single  and  infallible  test  by  which  we  are 
always  to  judge  which  employment  is  most  and  which  is  least 
advantageous. 

vants,  and  by  the  energy  of  his  skill,  mo\nng  a  weight  that  would  crush  a 
thousand  men.  For  this,  and  many  interesting;  illustrations  of  the  advance  of 
modern  science,  see  Griscom's  Year  in  Europe ;  Quarterly  Review,  No.  62, 
Article  5 — E. 

*  The  distinction  here  alluded  to,  between  public  advantage  and  pri- 
vate profit,  forms  the  dividing  line  between  the  liberal  and  restrictive  sys- 
tems of  Polit.cal  Economy  a  point  so  important,  that  it  cannot  be  too  fre- 
quently insisted  upon. 

If  national  wealth  be  but  the  sum  of  the  wealth  of  the  individuals  of 
whom  that  nation  is  composed,  then  the  increase  of  national  wealth  « 
equivalent  to  the  sum  of  individual  profit — and  as  individuals  best  know 
their  own  interest,  national  prosperity  is  best  consulted  by  allowing  them  to 
follow  it.     This  forms  what  is  termed  the  liberal  system. 

But  if,  on  the  contrary,  individual  gains  may  be  pursued  to  the  detriment 
of  national  wealth,  then  must  the  guardians  of  the  national  welfai-e  be  ever 
upon  the  watch  against  individual  encroachment — and  the  labour  and  enter- 
prize  of  individuals  limited  and  restrained  within  certain  boundaries.  This 
is  the  restrictive  system,  and  looks  to  monopolies,  bounties,  and  duties,  to 
guide  and  direct  the  capital  of  the  nation  into  its  most  productive  chaimels. 
This  sys'em  may  be  said  to  exist  under  two  forms. 

First,  in  its  extreme  character,  wherein  it  teaches  that  individual  profit 
may  be  pursued  to  a  national  loss — a  doctrine  that  deals  in  prohibitions  and 
penalties. 

Secondly,  in  its  modified  form,  viz.  that  individual  profit  is  not  the  crite- 
rion of  national  gain ;  and  hence  that  individuals  must  be  allured  into  those 
occupations  which  are  most  for  tlie  public  advantage.  This  system  upholds 
bounties  and  countervailing  duties,  and  generally  looks  to  agriculture  and 
internal  trade  as  most  entitled  to  the  aid  of  government. 

Between  these  opposing  opinions  the  Editor  does  not  hesitate  to  profess 
himself  attached  to  the  liberal  system,  or  that  which  identifies  individual 
profits  with  national  benefit — subject,  however,  in  its  general  principles,  to 
three  specific  limitations. 

1.  Of  a  political  nature,  tliat  is  to  say,  that  individual  policy,  which  is 
founded  upon  a  state  of  peace,  should  yield  to  those  necessary  preparations 
for  a  state  of  war,  of  the  period  and  extent  of  wliich  government  aloae  are 
competent  judges.  This  exce^Uion  includes  all  provisions  that  relate  to 
munitions  of  war,  to  embargoes,  interdicts.  Sic,  cases  determinable  by  facts 
known  only  to  public  functionariec. 

The  2d  is  of  a  moral  and  genera]  nature.  Individual  profits  are  not  to 
be  extracted  from  the  miseries  of  oUxers,  from  the  vices  ajnd  passious  of  soci- 


POLITICAL    ECONOMY.  91 

A  capital  may  be  employed  in  four  different  ways,  either,  Different 
first,  in  the  production  of  the  raw  produce  required  for  the  use  of'capiuj"** 
and  consumption  of  the  society  ;  or,  secondly,  in  manufacturing  and  industry, 
and  preparing  that  raw  produce  for  immediate  use  and  consump- 
tion ;  or,  thirdly,  in  transporting  the  raw  and  manufactured  pro- 
ducts from  one  place  to  another  according  to  the  demand ;  or, 
fourthly,  in  dividing  particular  portions  of  either  into  such  small 
parcels  as  suit  the  convenience  ol  those  who  want  them.     The 
capitals  of  all  those  who  undertake  the  improvement  or  cultiva- 
tion of  hinds,  mmes,  or  fisheries,  are  employed  in  the  first  of 
these  ways  ;  the  capital  of  all  master  manufacturers  is  employed 
in  the  second  ;  that  of  all  wholesale  merchants  in  the  third  ;  and 
that  ol"  all  retailers  in  the  fourth.     It  is  difficult  to  conceive  that 
a  capital  can  be  employed  in  any  way  which  may  not  be  classed 
under  some  one  or  other  of  these  heads. 

On  the  importance  ol'  the  employment  of  capital  in  the  acqui-  Employmem. 
sition  of  raw  produce,  and  especially  in  the  cultivation  of  the  °*^  *'"p.""'p'" 
soil,  it  is  unnecessary  to  enlarge.  It  is  from  the  soil,  including 
under  that  term  mines  and  fisheries,  that  the  matter  of  all  com- 
modities that  either  minister  to  our  necessities,  our  comforts,  or 
our  enjoyments,  must  have  been  originally  derived.  The  indus- 
try which  appropriates  the  raw  productions  of  the  earth,  as  they 
are  offered  to  us  by  nature,  preceded  every  other.  But  these 
spontaneous  productions  are  always  extremely  limited.  And  it 
is  by  agriculture  only,  that  is,  by  the  united  application  of  im- 
mediate labour  and  of  capital,  to  the  cultivation  of  the  ground, 
that  large  supplies  of  those  species  of  raw  produce,  which  form 
the  principal  part  of  the  food  of  man,  can  be  obtained.  It  is 
not  quite  cei'tain  that  any  of  the  species  of  grain,  as  wheat, 
barley,  rye,  oats,  &c.  have  ever  been  discovered  growing  spon- 
taneously. But,  although  this  must  originally  have  been  the 
case,  still  the  extreme  scarcity  of  such  spontaneous  productions 
in  every  country  with  which  we  are  acquainted,  and  the  labour 
which  it  requires  to  raise  them  in  considerable  quantities,  prove 
beyond  all  qu.^stion  that  it  is  to  agriculture  that  we  are  almost 
exclusively  indebted  for  them.  The  transition  from  the  pasto- 
ral to  the  agricultural  mode  of  life  is  decidedly  the  most  import- 
ant step  in  the  progress  of  society.  ■  Whenever,  indeed,  we  com- 
pare the  quantity  of  food,  and  of  other  raw  products  obtained 
from  a  given  surface  of  a  well  cultivated  country,  with  those 
obtained  from  an  equal  surface  of  an  equally  fertile  country, 
occupied  by  hunters  or  shepherds,  the  powers  of  agricultural 
industry  in  increasing  useful  productions  appear  so  striking  and 
extraortlinary,  that  we  cease  to  feel  surprise  at  the  preference 
which  h^s  been  so  early  and  generally  givn  to  agriculture  over 
manufactures  and  commerce  ;  and  are  disposed  to  subscribe 
without  hesitation  to  the  panegyric  of  Cicero  when  he  says, 

ety.  Under  this  exception  fall  the  slave  trade,  gambling  houses,  &c.  which, 
however,  profitable  to  the  individual,  are  baneful  to  society,  and  check  na- 
tional prosperity  in  its  very  sources. 

The  3d  exception  relates  to  home  speculation,  in  which,  as  the  wealth  of 
the  coiuitry  merely  changes  hands,  the  profits  are  but  the  criterion  of  a  ri- 
sing market,  since  such  accumulation  would  have  taken  place  had  the  com- 
modity continued  in  the  hands  of  its  original  holders.  Such  transfers,  there- 
fore, have  no  influence  oa  national  prosperity.  On  this  subject  see  Say^ 
Books  I.  and  11. — E, 


92  POLITICAL  ECONOMY. 

Different       "  Omtiium  autem  rerum  ex  quibus  aliquid  acquiritur,  nihil  est 
o"caphai"**  agricultura  melius,  nihil  uberius,  nihil  dulcius,  nihil  homine,  nihil 

and  Industry.  Hbero  dignius.^^* 

Em^mcnt  But  are  there  really  any  just  grounds  for  this  preference  ? 
ManuKii-'"  ^'^^  ^^^  manufactures  and  commerce  equally  advantageous  as 
cinsindustry.  agficuHure  ?  It  is  plain  that  without  agriculture  we  could  never 
possess  any  considerable  supply  of  the  materials  out  of  which 
food  and  clothes  are  made  ;  but  is  it  not  equally  plain,  that 
without  a  knowledge  of  the  arts  by  which  they  are  converted 
into  food  and  clothes,  the  largest  supply  of  these  materials 
could  be  of  little  or  no  service  ?  The  labour  of  the  miller 
who  grinds  the  corn,  and  of  the  baker  who  bakes  it,  is  equally 
necessary  to  the  production  of  bread,  as  the  labour  of  the  hus- 
bandman who  tills  the  ground.  It  is  the  business  of  the  agri- 
culturist to  raise  flax  and  wool ;  but  if  the  labour  of  the  spin- 
ner and  the  weaver  had  not  given  them  utility,  and  fitted  them 
for  being  made  a  comfortable  dress,  they  would  have  been 
nearly,  if  not  entirely  worthless.  Without  the  labour  of  the 
miner  who  digs  the  mineral  from  the  bowels  of  the  earth,  we 
could  not  have  obtained  the  matter  out  of  which  many  of  our 
most  useful  implements  and  splendid  articles  of  furniture  have 
been  made  ;  but  if  we  compare  the  ore  when  dug  from  the 
mine  with  the  finished  articles,  we  shall  certainly  be  convinced 
that  the  labour  of  the  purifiers  and  refiners  of  the  ore,  and 
of  the  artists  who  have  afterward  converted  it  to  useful  pur- 
poses, has  been  quite  as  advantageous  as  the  industry  of  the 
miner. 
Necessity  of  But  oot  Only  is  it  Certain  that  manufacturing  industry,  or  that 
t^in^g"indu8Try  species  of  industry  which  fits  and  adapts  the  raw  produce  of 
lo  the  im-      nature  to  our  use,  is  requisite  to  render  its  acquisition  of  any 

i)rov€mcnt  in  .      ,  .  .  "^ 

.^irricuiture.  considerable  value  ;  but  it  is  also  certain,  that  without  manu- 
facturing industry  this  very  raw  produce  could  never  have  been 
obtained  in  any  considerable  quantity.  The  labour  of  the  me- 
chanic who  fabricates  the  plough  is  as  efficacious  in  the  produ- 
cing of  corn  as  the  labour  of  the  husbandman  who  guides  it. 
But  the  plough-wright,  the  mill-wright,  the  smith,  and  all  those 
artisans  who  prepare  tools  and  machines  for  the  husbandman, 
are  really  manufacturers,  and  differ  in  no  respect  whatever  from 
those  who  are  employed  to  give  utility  to  wool  and  cotton,  ex- 
cept that  they  work  on  harder  materials.  The  fixed  capital 
vested  in  tools  and  machines  is  the  product  of  the  labour  of  the 
tool  and  engine  manufacturer  ;  and  without  the  aid  of  this  fixed 
capital,  it  is  impossible  that  agricultural  labour,  or  that  any 
other  sort  of  labour,  could  ever  have  become  considerably 
productive. 

*  "  Of  all  the  sources  of  revenue,  there  is  none  preferable  to  agricul- 
ture, more  productive,  more  delightful,  or  more  worthy  of  a  wise  and  li- 
beral mind." 

Cicero  herein  touches  upon  some  of  those  native  sympathies  of  the  human 
heart,  which  make  it  turn  involuntarily  to  the  country  in  search  of  happi- 
ness, and  which,  in  questions  of  Political  Economy,  must  be  taken  into  ac- 
count, inasmuch  as  they  reconcile  men  to  small  profits  when  connected  with 
its  enjoyments,  in  preference  to  the  ttimult,  the  toil,  and  the  wealth  of  the 
city.  This  may  be  cited  as  one  out  of  many  instances,  to  show  thot  this  is 
a  moral  science,  resting,  not  merely  on  the  physical  wants,  but  on  the  de- 
.'^ires  and  passions  of  men.    See  Malthu'?'  Folit.  Ef'on.  Introduction. — E. 


POLITICAL    ECONOMY.  U3 

<•  Distino-uer  "  savs  the  Marquis  Gamier,  "  le  travail  lies  Different 
ouvriers  tic  I'lignculture  d  avec  celui  des  antres  ouvners,  est  «(•  capital 
une  abstraction  presque  tonjoiirs  oiseusc.  Toute  richesse,  dans  »"'ii"duatry. 
le  sens  dans  lequel  nous  la  concevons,  est  iK^cessaircment  le  y6- 
sultat  de  ces  deux  gonres  de  travail,  et  la  consonimation  ne  peut 
pas  plus  se  passer  de  I'un  que  de  I'autre.  Sans  leur  concours 
simultane  il  ne  peut  y  avoir  de  chose  consommable,  et  par  con- 
sequent point  de  richesse.  Comment  pourrail-on  done  compa- 
rer leurs  produits  respectifs,  puisque,  en  separant  ces  deux  es- 
ptces  de  travail,  on  ne  peut  plus  concevoir  de  veritable  produit, 
de  produit  consommable  et  ayant  une  valeur  rc'elle  ?  La  valeur 
du  Ule  sur  pied  resulte  de  I'industrie  du  moissonneur  qui  recuil- 
lera,  du  batteur  qui  le  separera  de  la  paille,  du  meuniev  et  du 
boulanger  qui  le  convertiront  successivement  en  farine  et  eu 
pain,  tout  comme  elle  resulte  du  travail  du  laboureur  et  du  se- 
meur.  Sans  le  travail  du  tisserand,  le  lin  n'aurait  pas  plus  le 
droit  d'etre  compte  au  nombre  des  richesses,  que  I'ortie  ou  tout 
autre  vegetal  inutile.  A  quoi  pourrait-il  done  servir  de  recher- 
cher  lequel  de  ces  deux  genres  de  travail  contribue  le  plus  a 
Favancement  de  la  richesse  nationale  ?  N'est-ce  pas  comme 
si  Ton  disputait  pour  savoir  lequel,  du  pied  droit  ou  du  pied 
gauche,  est  plus  utile  dans  Taction  de  marcher  ?"* 

In  fact  there  is  not  at  bottom  any  real  distinction  between  agri-  No  real  dii'- 
cultural  and  manufacturing  industry.  It  is,  as  we  have  already  J^'^en  AgTi- 
shown,  a  vulsar  error  to  suppose  that  the  operations  of  hus-  cultural  and 

1  ,  1  •  il  J       1         (•  ij  1  1      •  •   i     Maniitactu- 

bandry  add  any  thing  to  the  stock  ot  matter  already  in  exist-  ring  industry. 
ence.    All  that  man  can  do,  and  all  that  he  ever  does,  is  merely 
to  give  to  matter  that  particular  form  or  shape  which  fits  it  for 
his  use.     But  it  was  contended  by  M.  Quesnay  and  the  French 
economists,  and  their  opinions  have  in  this  instance  been  espou- 
sed by  Dr.  Smith,  that  the  labour  of  the  husbandman  in  adapt- 
ing matter  to  our  use  is  powerfully  facilitated  by  the  aid  derived 
from  the  vegetative  powers  of  nature,  while  the  labour  of  the 
manufacturer  has  to  perform  every  thing  itself  without  any  such 
co-operation. — "  No  equal  quantity  of  productive  labour  or  ca-  Opinion  of 
pital  employed  in  manufactures,"  says  Dr.  Smith,  "can  ever  J^gpe","','^ 
occasion  so  great  a  reproduction  as  if  it  were  emi)loved  in  agri-  ti'"  su^ierior 

a  '^  X       ./  o         Prnauctive- 

ness  of  Agri- 
culture. 

*  See  page  58  of  the  Discours  Preliminaire  to  the  second  edition  of  the 
tninslatiou  of  the  Wealth  of  J^ations,  by  the  Marquis  Garnier.  The  same 
passage  is  in  the  first  edition,  published  in  1802. 

"  To  distinguish,"  says  the  Marquis  Garnier,  "  between  the  labour  of  the 
agriculturist  and  that  of  other  workmen,  is  an  idle  refinement.  All  riches 
in  the  sense  in  which  we  use  the  term,  are  the  result  of  the  united  labour 
of  both,  and  to  be  complete  can  want  neither  the  one  nor  the  other.  With- 
out their  concurrence  there  can  be  no  completion  of  the  product,  and  con- 
sequently no  riches.  How  then  can  one  compare  their  respective  results, 
since  in  separating  the  two  species  of  labour,  there  is  left  no  true  product, 
no  consumable  commodity,  no  real  value.  The  value  of  corn  unharvested, 
arises  from  the  labour  of  the  reaper  who  gathers  it,  the  thrasher  who  sepa- 
rates it  from  the  straw,  tlie  miller  and  the  baker  who  convert  it  successive- 
ly into  meal  and  into  bread,  as  well  as  it  does  from  the  labour  of  the  farmer 
and  his  servant.  Without  the  labour  of  the  weaver  flax  would  have  no 
more  claim  to  be  ranked  with  riches  than  the  nettle  or  any  other  useless 
vegetable.  To  what  end,  therefore,  does  it  serve  to  seek  which  of  these 
two  species  of  labour  contributes  most  to  the  advancement  of  national 
wealth .'  Is  it  not  as  if  one  were  to  dispute,  whether  the  right  foot  or  the 
left,  were  most  serviceable  in  the  action  of  walking  ?" — E. 

1? 


94  POLITICAL   ECONOMY. 

Different       culturc.     Fn  manufactures  nature  does  nothing,  man  does  all  ,• 
or'capUaT'^  and  the  reproduction  must  always  be  proportioned  to  the  strength 
andindustiy.  of  the  agents  that  occasion  it.    The  capital  employed  in  agricul- 
ture, therefore,  not  only  puts  into  motion  a  greater  quantity  of 
productive  labour  than  any  equal  capital  employed  in  manufac- 
tures, but  in  pro})ortion,  too,  to  the  quantity  of  productive  la- 
bour which  it  employs,  it  adds  a  much  greater  value  to  the  an- 
nual produce  of  the  land  and  labour  of  the  country,  to  the  real 
wealth  and  revenue  ot  its  inhabitants.     Of  all  the  ways  in  which 
a  capital  can  be  employed,  it  is  by  far  the  most  advantageous  to  the 
society.'' — [Wealth  of  Nations,  Vol.  II.  p.  53.) 
j^iToroftiiis       This  is  perhaps  the  most  objectionable  passage  in  the  Wealth 
OiMiiion.       of  Nations ;  and  it  is  really  astonishing  how  so  acute  and  saga- 
cious a  reasoner  as  Dr.  Smith  could  have  maintained  a  doctrine 
so  manifestly  erroneous.*    It  is  unquestionably  true,  that  nature 
powerfully  assists  the  labour  of  man  in  agriculture.     The  hus- 
bandman prepares  the  ground  for  the  seed,  and  deposits  it  there ; 
but  it  is  nature  that  unfolds  the  germ,  that  feeds  and  ripens  the 
^ature  co-    growing  plant,  and  brings  it  to  a  state  of  maturity.    But  does  not 
operates  with  nature  do  as  much  for  us  in  every  other  department  of.  industry  ? 

Man  in  Mnn-  -_,  /•.  iriL-i  i_- 

ufacturcsand  1  he  powers  ol  Water  and  ot  wind,  which  move  our  machmery, 
Commerce.  guppQ^t  pur  ships,  and  impel  them  over  the  deep, — the  pressure 
of  the  atmosphere,  and  the  elasticity  of  steam,  which  enable  us 
to  work  the  most  stupendous  engines,  are  they  not  the  sponta- 
neous gifts  of  nature  ?  In  fact,  the  single  and  exclusive  advan- 
tage of  machinery  consists  in  its  having  enabled  us  to  press  the 
powers  of  nature  into  our  service,  and  to  make  them  perform 
the  principal  part  of  what  would  otherwise  have  been  wholly 
the  work  of  man.  In  navigation,  for  example,  is  it  possible  to 
doubt,  that  the  powers  of  nature — the  buoyancy  of  the  water, 
the  impulse  of  the  wind,  and  the  polarity  of  the  magnet,  con- 
tribute fully  as  much  as  the  direct  labour  of  the  sailor  to  waft 
our  ships  from  one  hemisphere  to  another  ?  In  bleaching  and  in 
fermentation  the  whole  process  is  carried  on  by  natural  agents. 
And  it  is  to  the  effects  of  heat  in  softening  and  melting  metals, 
in  preparing  our  food,  and  in  warming  our  houses,  that  we  owe 
man)'  of  our  most  powerful  and  convenient  instruments,  and  that 
these  northern  climates  have  been  made  to  aflford  a  comfortable 
habitation.     So  far,  indeed,  from  its  being  true  that  nature  does 

'■''■  One  of  the  earliest  expositions  of  this  error,  will  be  found  in  the  Re- 
))ort  on  Manufactures,  by  General  Hamilton,  already  quoted.  The  cen- 
sure passed  upon  Adam  Smith  by  our  author  is,  however,  somewhat  harsh. 
With  a  slight  modification,  the  language  of  Smith  admits  of  full  justifica- 
tion. Had  he  confined  himself  to  the  consideration  of  exchangeable  value, 
it  would  have  been  true,  that  in  agriculture  alone  nature  is  operative,  and 
where  she  ceases  to  work  Avith  man,  which  is  comparatively  the  case  on 
inferior  soils,  a  rise  of  value  is  the  result.  But  not  so  in  manufactures  : — 
though  nature  works,  yet  working  freely,  equally,  and  universally,  her 
services  do  not  enter  into  the  account :  they  add  to  wealth  but  not  to  value ; 
they  are  are  simply  a  matter  of  capital,  and  add  to  the  cost  of  production 
only  the  interest  of  the  capital  invested  in  the  machine,  including  the  costs 
of  repair.  Considering  Political  Economy,  therefore,  as  the  science  of  va- 
lues, it  may  be  correctly  asserted,  that  in  agriculture  alone  nature  is  a  co- 
worlcer  with  man. 

For  a  fuller  defence  of  Smith's  sentiments,  see  Quarterly  Rev.  No.  60. 
Malthus,  Sect.  11.  For  opposing  views,  see  Say,  Book  I,  lirst  7  chapter?. 
ntcavdo.  Chap.  xxiv.  xxxi. —  E. 


POLITICAL   ECONOMV.  95 

much  for  man  in  agriculture,  and  nothing  in  manufactures,  that  Difleront 
the  fact  is  nearly  the  reverse.  There  arc  no  Hmits  to  the  oTcapUai"'* 
bounty  of  nature  in  manufactures,  but  there  are  hmits,  and  not  and  industry. 
rery  remote  ones,  to  her  bounty  in  agriculture.  The  greatest 
possible  amount  of  capital  might  be  expended  in  the  construc- 
tion of  steam-engines,  or  of  any  other  sort  of  machinery,  and 
after  they  had  been  multiplied  to  infinity,  the  last  would  be  as 
powerful  and  as  efficient  in  saving  labour,  and  producing  com- 
modities as  the  tirst.  Such,  however,  is  not  tl»e  case  with  the 
soil.  Lands  of  the  first  quality  are  speedily  exhausted  ;  and  it 
is  impossible  to  apply  capital  indefinitely  even  to  the  best  soils, 
without  obtaining  from  it  a  constantly  diminishing  rate  of  profit. 
The  rent  of  the  landlord  is  not,  as  Dr.  Smith  conceived  it  to  be, 
the  recompense  of  the  work  of  nature  remaining,  after  all  that 
part  of  the  product  is  deducted  which  can  be  regarded  as  th(^ 
recompense  of  the  work  of  man !  But  it  is,  as  we  shall  here- 
after show,  the  excess  of  produce  obtained  from  the  best  soils 
in  cultivation,  over  that  which  is  obtained  from  the  worst — it  is 
a  consequence  not  of  the  increase,  but  of  the  diminution  of  the 
productive  power  of  the  labour  employed  in  agriculture. 

But  if  the  giving  utility  to  matter  be,  as  it  really  is,  the  single  Employment 
and  exclusive  object  of  every  species  of  productive  industry,  it  is  comraertiai 
plain  that  the  capital  and  labour  which  is  employed  in  carrying  in<iustrv. 
commodities  from  where  they  are  produced  to  w  here  they  are  to 
be  consumed,  and  in  dividing  them  into  minute  portions,  so  as  to 
fit  the  wants  of  the  consumers,  is  really  as  productive  as  either 
agriculture  or  manufactures.*     The  labour  of  the  miner  gives 

*  As  there  still  exists  a  strong  prejudice  in  favour  of  judg^ing  of  tlie  pro- 
fits of  commerce,  by  the  old  rule  of  a  favourable  balance  of  trade,  as  deri- 
ved from  the  custom-house  books,  it  is  worth  while  exliibiting  its  futility, 
by  showing  its  inconsistency  with  acknowledged  facts. 

On  an  average  of  the  years  1802,  1803,  1804,  the  following  balances  ap- 
pear, as  returned  to  the  Treasury  of  the  United  States : — 

Balance  Favourable.        Uiifavonralilf . 
Trade  with  Great  Britain,  $  12.029,04'2 

do.         Prussia,  "         $  424,386 

do.         China,  and  the  East,  4,424,649 

do.         Italy,  1,344,260 

do.         France,  523,887 

do.         Portugal,  1,268,677 

General  Balance  on  total  Commerce  of  U.  States,  6,369,251 
Thus  it  would  appear,  that  of  all  tlie  trade  we  carry  on,  that  with  Great 
Britain  is  the  most  injurious  to  our  prosperity,  while  that  of  Italy  is  the 
most  favourable, — tha.t  our  trade  to  Portugal  is  better  by  near  seven  mil- 
lions, than  that  to  China, — and  that  the  country  is  an  annual  loser,  on  the 
whole  of  its  ti'ade,  to  the  amount  of  near  six  and  a  half  millions. 

That  such  a  calculation  is  false  in  principle,  has  already  been  shown ; 
this  statement  proves  it  fallacious  in  its  conclusions.  Among  its  specific 
errors  may  be  mentioned,  1.  That  no  allowance  is  made  for  specie  ex- 
ported, which  ought  to  be  entered  as  any  other  commodity ;  nor,  2.  For 
the  profits  of  freight,  which  are  paid  out  of  the  increased  value  of  the 
commodity.  The  former  of  these  two  items  amounted  in  those  years,  to 
about  five  millions  of  dollars  :  the  latter  to  the  still  greater  sum  of  thirty 
millions.  The  ground  of  this  latter  calculation  is,  taking  600,000  tons  as 
the  average  of  the  United  States  tonnage  in  those  three  years,  employed 
in  the  foreign  trade,  and  calculating  the  profits  of  freight  at  |50  per  ton, 
which  is  considered  by  practical  men  as  a  low  estimate.  Consult  further, 
Pitkin  and  Seybert's  Statistics,  Review  of  Bristed's  Resources  in  North 
American,  Vol.  VII.,  Review  of  Seybert  in  North  American,  No.  25,  Ba- 
Innce  of  Trnde  in  Quarterly  Rev.  Vol.  V.  257,  Vol.  IX.  .336.—/^. 


96  POLITICAL    ECONOMY. 

piflVrcnt  utility  to  matter — to  coal  for  example — by  bringing  it  from  the 
o'f"capi"ai"''  'jo^^t'Js  »*'  ^^^^  ^'^^'th  to  its  Surface  ;  but  the  labour  of  the  mer- 
:ind  Industry,  chant,  or  carrier,  who  transports  this  coal  from  the  mine  where 
it  has  been  dug  to  the  city,  or  place  where  it  is  to  be  burned, 
gives  it  a  further,  and  perhaps  a  more  considerable  value.  We 
do  not  owe  our  fires  exclusively  to  the  miner,  or  exclusively  to 
the  coal  merchant.  They  are  the  result  of  the  conjoint  opera- 
lions  of  both,  and  also  of  the  operations  of  all  those  who  have 
furnished  them  with  the  tools  and  implements  used  in  their  re- 
spective employments. 
AiUantngc  Not  Only,  liowcver,  is  it  necessary  that  commodities  should 
OcaiCTs.'  ^6  brought  from  where  they  are  produced  to  where  they  are  to 
be  consumed,  but  it  is  also  necessary  that  they  should  be  divi- 
ded into  such  small  and  convenient  portions,  that  each  indivi- 
dual may  have  it  in  his  power  to  purchase  the  precise  quantity 
of  them  he  is  desirous  of  obtaining.  "  If,"  says  Dr.  Smith, 
"  there  was  no  such  trade  as  a  butcher,  every  man  would  be 
obliged  to  purchase  a  whole  ox  or  a  whole  sheep  at  a  time. 
This  would  generally  be  inconvenient  to  the  rich,  and  much 
more  so  to  the  poor,  if  a  poor  workman  was  obliged  to  pur- 
chase a  month's,  or  six  months'  provisions  at  a  time,  a  great 
part  of  the  stock  which  he  employs  as  a  capital  in  the  instru- 
ments of  his  trade,  or  in  the  furniture  of  his  shop,  and  which 
yields  him  a  revenue,  he  would  be  forced  to  place  in  that  part 
of  his  stock  which  is  reserved  for  immediate  consumption,  and 
which  yields  him  no  revenue.  Nothing  can  be  more  convenient 
for  such  a  person  than  to  be  able  to  purchase  his  subsistence 
from  day  to  day,  or  even  from  hour  to  hour,  as  he  wants  it.  He 
is  thereby  enabled  to  employ  almost  his  whole  stock  as  a  capi- 
tal. He  is  thus  enabled  to  furnish  work  to  a  greater  value,  and 
the  profit  which  he  makes  by  it  in  this  way  much  more  than 
compensates  the  additional  price  which  the  labour  of  the  re- 
tailer gives  to  the  goods.  The  prejudices  of  some  political 
writers  against  shopkeepers  and  tradesmen  are  altogether  with- 
out foundation.  So  far  is  it  from  being  necessary,  either  to  tax 
them,  or  to  restrict  their  numbers,  that  they  can  never  be  mul- 
tiplied so  as  to  hurt  the  public  interests,  though  they  may  so  as 
to  hurt  their  own  individual  interests.  The  quantity  of  grocery 
goods,  for  example,  which  can  be  sold  in  a  particular  town,  is 
limited  by  the  demand  of  that  town  and  its  neighbourhood. 
The  capital,  therefore,  which  can  be  advantageously  employed 
in  the  grocery  trade,  cannot  exceed  the  capital  required  to  pur- 
chase and  retail  these  goods.  If  this  capital  is  divided  between 
two  different  grocers,  their  competition  will  obviously  tend  to 
make  both  of  them  still  cheaper  than  if  it  were  in  the  hands 
of  one  only ;  and  if  it  were  divided  among  twenty,  their  com- 
petition would  be  just  so  much  the  greater,  and  the  chance  of 
their  combining  together  in  order  to  raise  the  price  just  so  much 
the  less.  Their  competition  might,  perhaps,  ruin  some  of  them- 
selves ;  but  to  take  care  of  this  is  the  business  of  the  parties 
concerned,  and  it  may  safely  be  trusted  to  their  discretion.  It 
can  never  hurt  either  the  consumer  or  the  producer ;  on  the 
contrary,  it  must  tend  to  make  the  retailers  both  sell  cheaper 
and  buy  dearer,  than  if  the  whole  trade  was  monopolized  by 
one  or  two  persons.    Some  of  them,  perhaps,  may  occasionally 


POLITICAL  ECONOMY.  3< 

<^pcov  a  weak  customer  to  buy  what  he  has  no  occasion  for.  Different 
This  e;  il  is,  however,  ot  too  little  importance  to  deserve  the  „,•  capital 
public  attention,  nor  would  it  necessarily  be  prevented  by  re- a>i<i industry. 
stricting  their  number."* — (Wealth  of  jVations,  II.  p.  48.) 

'  *  These  observations  of  Adam  Smith,  lead  to  the  consideration  of  the 
policy  of  a  measure,  which  was  stronj;ly  ur2:ed  upon  Con.^ress  a  few  years 
since,  by  the  Representatives  from  xNew-York,  viz.  Restriction  of  Auction 
Sales,  by  duties  upon  goods  thus  solil. 

The  arguments  in  favour  of  such  restriction,  were  in  general  these, 
1.  The  injury  that  accrued  by  reason  of  such  mode  of  selling  to  the  great. 
body  of  regular  merchants,  on  whom  the  prosperity  of  the  nation  so  mate- 
'rially  depended.  .2.  The  injury  done  to  the  public  by  a  method  of  selling 
that  involved  no  responsibihty,"and  thus  threw  into  the  country  articles  of 
an  inferior  value. 

The  general  principles  of  the  science,  which  have  a  bearing  upon  these 
arguments,  are  the  following  : — 

1.  To  the  first  objection,  the  answer  is, — the  value  of  merchants  to  the 
community,  is  not  ab.solute,  but  relative.  They  constitute  an  intermediate 
class,  who  stand  between  the  producer  and  the  consumer :  the  sole  benefit 
they  confer  upon  society  arises,  not  Irora  their  numbers,  but  from  the  re- 
sults obtained  from  their  labours,  and  provided  those  be  secured,  the  fewer 
the  better. 

The  interests  of  the  community  lie,  in  the  commodity  coming  to  the 
consumer  burthened  with  as  little  expense  as  possible ;  every  needless 
charge  is  a  tax  upon  society  without  equivalent.  If  then,  through  the  me- 
dium of  Auction  Sales,  the  article  reaches  the  hands  of  the  consumer  at  a 
less  expense  than  in  the  ordinary  way,  society  is  the  gainer  by  that  differ- 
ence ;  and  if  it  operate  to  diminish  the  number  of  regular  merchants,  it  is 
because  a  cheaper  medium  ol'  transmission  has  been  found — a  cheaper  ma- 
chine invented  to  answer  the  same  purpose.  And  if  it  be  questioned 
whether  it  be  that  cheaper  machine  or  not,  the  answer  is — the  commu- 
nity is  the  best  judge, — government  can  only  reason,  but  society  feels, — if 
it  be  cheaper  they  will  adopt  it,  if  not  they  will  abandon  it.  That  it 
would  throw  out  of  employ  thousands  who  derive  their  support  from  re- 
gular trade,  is  so  far  from  being  an  objection,  that  it  affords  the  very  proof 
and  criterion  of  its  superiority.  It  proves  it  to  be  a  labour-saving  ma- 
chine, and  society  is  the  gainer  precisely  to  the  amount  of  that  surplus  la- 
bour, which,  as  we  have  seen  in  the  case  of  machines,  though  thrown  out 
of  employ  for  a  time,  is  soon  reabsorbed  by  the  increasing  prosperity  of 
society,  and  by  the  new  capital  arising  out  of  this  very  saving. 

The  general  principle  here  laid  down,  and  which  applies  to  every  clas.=' 
of  the  community,  is  that  their  importance  to  the  prosperity  of  society  is 
to  be  estimated,  not  by  their  number,  but  by  the  services  they  render, — 
the  end  alone  is  valuable  ;  and  of  the  means  for  attaining  it,  those  are  best 
which  are  cheapest,  provided  they  are  equally  secure  and  efficacious  ;  and 
of  this,  society,  through  the  medium  of  private  interest,  is  the  best  judge. 
This  is  a  pi-inciple  which  will  leave  the  clergy  to  voluntary  support,  cur- 
tail the  law  of  its  unnecessary  intricacies,  and  permit  consumers  to  deter- 
mine the  cheapest  and  best  mediimi  of  purchase. 

2.  If  Auction  Sales,  as  it  is  argued,  be  unfavourable  to  the  public  inte-  • 
rest,  by  want  of  surety,  or  inferiority  of  goods,  the  reaction  arising  from 
the  consumers,  will  either  correct  the  evil  or  abandon  the  method  of  pur- 
chase. But  the  real  evil  of  Auction  Sales,  as  existing  in  the  State  of  New- 
York,  consists  in  their  being  a  monopoly, — thrown  open,  they  will  correct 
themselves, — there  will  then  be  a  competition  for  character  as  well  as  pre- 
sent profit,  and  tlie  operations  of  self-interest  wili  impose  a  guarantee  more 
certain  and  efficacious  than  any  that  the  laws  can  devise. 

To  the  unrestrained  application  of  this  general  principle,  there  is,  it 
must  be  acknowledged,  a  moral  check,  which  calls  upon  government  as 
the  guardian  of  public  morals,  to  interpose  its  ])ower  wherever  private 
gains  are  at  the  expense  of  the  demoralization  of  society.  As  an  instance 
of  this  just  control-  in  an  analogous  case,  may  be  mentioned  the  restric- 
■  tions"imposed  on  the  retailing  of  spirits.  But  this  differs  in  two  important 
respects  from  the  restrictions  imder  consideration : — 


98 


POLITICAL   ECONOMY. 


Different 
employments 
of  Capital 
and  Industry. 

Agriculture, 
Manufac- 
tures, and 
Commerce 
equally  ad 
vantagcous. 


Thus  it  appears,  that  all  the  modes  in  which  capital  can  be 
employed  in  productive  industry,  or,  in  other  words,  that  the 
raising  of  raw  produce,  the  frishioning  of  this  raw  produce,  af- 
ter it  is  raised,  into  useful  and  agreeable  articles,  the  carrying 
of  the  raw  and  manufactured  prothicts  from  one  place  to  ano- 
ther, and  the  retailing  of  them  in  such  portions  as  may  suit  the  ' 
public  dem;md,  are  equally  advantageous  :  that  is,  the  capital 
and  labour  employed  in  any  one  of  these  departments  contri- 
butes equally  with  the  capital  and  labour  employed  in  the  others, 
to  increase  the  mass  of  necessaries,  conveniencies,  and  luxu- 
ries. Without  a  previous  supply  of  raw  produce,  we  could, 
have  no  manufactures  ;  and  without  manufactures  and  commer- 
cial industry,  the  greater  part  of  this  raw  produce  would  be  en- 
tirely worthless,  and  could  neither  satisfy  our  wants  nor  contri- 
bute to  our  comforts.  Manufacturers  and  merchants  are  to  th^ 
body  politic  what  the  digestive  powers  are  to  the  human  body.* 
We  could  not  exist  without  food  ;  but  the  largest  supplies  of 
food  cannot  lengthen  our  days  when  the  machinery  by  which 
nature  prepares  and  adapts  this  food  for  our  use,  and  incorpo- 
rates it  with  our  body,  is  vitiated  and  deranged.  Nothing,  there- 
fore, can  be  more  silly  and  childish  than  the  estimates  that  are 
so  frequently  put  forth  of  the  compara<ive  advantages  of  agri- 
cultural, manufacturing,  and  commercial  industry".  They  are 
all  intimately  and  indissolubly  connected,  and  depend  upon,  and 
grow  out  of  each  other.  "  Land  and  trafle,"  to  borrow  the 
just  and  forcible  expressions  of  Sir  Josiah  Child,  "  are  twins, 
and  have  always,  and  ever  will,  zvax  and  wane  together.  It 
cannot  be  ill  with  trade  but  lands  will  fall,  nor  ill  with  lands  but 
trade  will  feel  it."  This  reasoning  cannot  be  controverted  ; 
and  on  its  authority,  we  are  entitled  to  condemn  every  attempt 
to  exalt  one  species  of  industry,  by  giving  it  factitious  advan- 
tages at  the  expense  of  the  rest,  as  being  equally  impolitic  and 
pernicious.  No  preference  has  ever  been  given,  or  can  be 
given  to  agriculturists  over  manufacturers  and  merchants,  or  to 
manufacturers  and  merchants  over  agriculturists,  without  occa- 
sioning the  most  extensively  ruinous  consequences.  Men  ought, 
in  every  instance,  to  be  allowed  to  follow  their  own  inclinations 
in  the  employment  of  their  stock  and  industry.  When  industry 
is  free,  the  interests  of  individuals  can  never  be  opposed  to 
the  interests  of  the  public. t     When  we  succeed  best  in  increa- 

1 .  First  as  the  regulation  relates  to  the  poor,  the  ignorant,  and  the  vicious; 
and  therefore  forms  but  a  part  of  that  just  guardianship  which  belongs  to 
the  laws  over  poverty,  ignorance,  and  vice. 

2.  As  it  relates  to  consumption,  and  not,  as  in  the  case  of  merchant  or 
auction  sales,  to  one  of  the  charges  of  production  :  the  legal  check,  conse- 
quently so  far  as  it  operates  upon  price,  tends  to  lower  it  to  the  rightful  con- 
sumer and  not  as  in  the  other  case  to  raise  it. — E. 

'*  This  is  a  happy  and  just  comparison,  and  exhibits  in  a  forcible  point 
of  view,  that  essential  concatenation  of  the  parts  of  the  body  politic,  which 
))ind3  tliem  into  one  common  whole ;  a  doctrine  fundamental  in  its  na- 
ture, demonstrative  in  its  character,  and  harmonious  in  its  uifluence  :  cut- 
ting off,  at  once,  the  most  fertile  source  of  intestine  division,  and  injurious 
legislation.  It  cannot,  therefore,  be  too  frequently  or  strongly  inculcated 
upon  the  minds  either  of  our  rising  legislators,  or  of  tliose  who  choose 
Ihem.— E. 

t  That  this  position  is  not  true  in  its  present  unqualified  form,  must  be 
obvious  to  all.    That  there  are  limitations  to  it,  both  moral  and  political. 


POLITICAL  ECONOMY.  99 

sing  our  own  wealth,  we  must  necessarily  also  succeed  best  in  Different 
increasing  the  wealth  of  the  Siate  of  which  we  are  subjects.*      orrapiTaT*^ 

This  mutual  dependance  of  the  diift^rent  branches  of  indus- »"'' ^dustry. 
try  on  each  other,  and  the  necessity  of  their  co-operation  to 
enable  mankind  to  make  any  considerable  progress  in  civihza- 
tion,  has  been  al)ly  illustrated  in  one  of  the  early  numbers  of 
the  Edinburgh  Review.  "  it  m;iy  safely  be  concluded,  that  all 
those  occupations  which  tend  to  supply  the  necessary  wants,  or 
to  multiply  the  comforts  and  pleasures  of  human  life,  are  equally 
productive,  in  the  strict  sense  of  the  word,  and  tend  to  augment 
the  mass  of  human  riches,  meaning  by  riches,  all  those  things 
which  are  necessary,  or  convenient,  or  delightful  to  man.  The 
progress  of  society  has  been  productive  of  a  complete  separa- 
tion of  employments  originally  united.  At  first  every  man  pro- 
vided, as  well  as  he  could,  for  his  necessities  as  well  as  his 
pleasures,  and  for  all  his  wants,  as  well  as  all  his  enjoyments. 
By  degrees  a  division  of  these  cares  was  introduced  ;  the  sub- 
sistence of  the  community  became  the  province  of  one  class, 
its  comforts  of  another,  and  .its  gratifications  of  a  third.  The 
different  operations  subservient  to  the  attainment  of  each  of 
these  objects  were  then  entrusted  to  different  hands  ;  and  the 
universal  establishment  of  barter  connected  the  whole  of  these 
divisions  and  subdivisions  together — enabled  one  man  to  manu- 
facture for  all,  without  danger  of  starving  by  not  ploughing  or 
hunting,  and  another  to  plough  or  hunt  for  all,  without  the  risk 
of  wanting  tools  or  clothes  by  not  manufacturing.  It  has  thus 
become  as  impossible  to  say  exactly  who  feeds,  clothes,  or  en- 
tertains the  community,  as  it  would  be  to  say  which  of  the  many 
workmen  employed  in  the  manufacture  of  pins  is  the  actual  pin- 
maker,  or  which  of  the  farm-servants  produces  the  crop.  All 
the  branches  of  useful  industry  work  together  to  the  common 
end,  as  all  the  parts  of  each  branch  co-operate  to  its  particular 
object.  If  you  say  that  the  farmer  feeds  the  community,  and 
produces  all  the  raw  materials  which  the  other  classes  work 
upon,  we  answer,  that  unless  those  other  classes  worked  up  the 
raw  materials,  and  supplied  the  farmer's  necessities,  he  would 
be  forced  to  allot  part  of  his  labour  to  this  employment,  whilst 
he  forced  others  to  assist  in  raising  raw  produce.  In  such  a 
complicated  system,  it  is  clear  that  all  labour  has  the  same  effect, 
and  equally  increases  the  whole  mass  of  wealth.  Nor  can  any 
attempt  be  more  vain  than  theirs  who  would  define  the  particu- 
lar parts  of  the  machine  that  produce  the  motion,  which  is 
necessarily  the  result  of  the  whole  porsers  combined,  and  depends 
on  each  particular  one  of  the  mutually  connected  members." — 
fVol.  IV.  p.  362.) 

Much  has  been  said  respecting  the  extraordinary  mortality  Manufae- 
of  large  manufacturing  establishments.     The  ready  communi-  jJio^nctlle 

of  increaseo 
has  already  been  shown.     See  note  on  page  90.     But  these  are  limitations  Mortality. 
our  author  would  willingly  admit,  and  the  object  of  the  Editor  in  stating 
them,  is  not  to  correct  error,  but  to  avoid  misapprehension — to  secure 
against  misconstruction  or  verbal  criticism,  a  principle  which  lies  at  the 
foundation  of  national  prosperity. — E. 

*  For  a  particular  examination  of  Dr.  Smith's  opinion  with  respect  to 
the  comparative  advantages  of  different  species  of  commerce,  see  Mr,  Ri- 
cardo's  jPrinciples  of  Political  Economy  and  Taxation,  1st  ed.  p.  497,  and 
llie  Edinburgh  Review  for  July  1819,  p.  71 . 


100  POMTICAL    DCONOMW 

Different  cation  of  contagion  where  people  arc  crowded  together — the 
of  CapiTaT**  want  of  sufficient  ventilation — the  confinement  of  children — and 
andindustry.  the  positive  unhealthiness  of  some  particular  processes,  are  cir- 
cumstances from  which  most  writers  have  been  led  to  infer  that 
the  mortality  in  manufacturing  cities  7nust  be  unusually  great, 
without  giving  themselves  the  trouble  to  inquire  whether  the 
fart  really  was  so.  The  returns  under  the  population  acts  have 
shown  the  fallacy  of  these  o|)inions.  No  one  can  doubt  that 
Gr-at  Britain  was  infinitely  more  of  a  manufacturing  country  in 
1810  and  1820  than  in  1780  ;  but,  notwithstanding "the  vast  in- 
crease during  the  imermediate  period  of  what  we  have  been  ia 
the  habit  of  considering  unhealthy  employments,  the  average 
mortality  in  England  and  Wales  in  1810  was  only  one  in  every 
53,  and  in  l820  only  one  in  every  58  of  the  existing  population, 
whereas  in  1780  it  was  one  in  every  40.  It  may  perhaps  be 
said,  that  this  increased  healthiness  is  owing  to  the  improve- 
ments in  agriculture — to  the  drainage  of  bogs  and  marshes,  the 
enclosure  and  cultivation  of  commons  and  wastes, — and  7wt  to 
the  extension  of  manufactures.  But  suppose  this  were  admit- 
ted, still  we  should  have  to  inquire  what  had  occasioned  these 
extraordinarij  iiiiprovements  in  agriculture  ?  And  a  moment's 
reflection  would  be  sufficient  to  convince  us  that  they  have 
principally  resulted  from  the  improvement  of  manufactures — 
from  the  increased  demand  of  the  manufacturing  population  for 
the  raw  produce  of  the  soil.  In  point  of  fact,  however,  it  is 
certain,  that  much  of  the  late  diminution  of  mortality  is  a  direct, 
and  not  an  indirect  consequence  of  the  improvement  and  exten- 
sion of  manufactures.  Every  one  knows  of  what  vast  impor- 
tance it  is  to  the  health  of  the  people  that  they  should  have  the 
means  of  providing  themselves  with  comfortable  clothes  at  a. 
cheap  rate.  And  this  is  one  of  the  many  advantages  which  im- 
provements in  manufacturing  industry. always  bring  along  with 
them.  The  reduction  in  the  price  of  cotton  goods  only,  occa- 
sioned by  the  greater  facility  vvith  which  they  are  now  produced, 
has  enabled  the  poorest  classes  of  individuals  to  clothe  them- 
selves in  a  warm,  clean,  and  elegant  dress  ;  and  has  thus  been 
productive  of  an  increase  of  comfort  and  enjoyment,  of  which 
it  is  extremely  difficult  for  us,  who  have  so  long  experienced  its 
beneficial  effects,  to  estimate  the  extent. 
u.viMou  of  The  effect  of  the  extreme  subdivision  of  labour  in  manufac- 
Labourdoes  turing  establishments,  and  the  exclusive  attention  which  it  re- 
iiie  La-'  quires  the  workman  to  bestow  on  one  single  operation,  has  been 
bourcr.  supposed  to  exert  a  most  pernicious  influence  on  his  mental 
faculties.  The  genius  of  the  master  is  said  to  be  cultivated, 
but  that  of  the  workman  to  be  condemned  to  perpetual  neglect. 
Most  mechanical  arts,  we  are  told,  succeed  best  under  a  total 
suppression  of  sentiment  and  reason.  A  habit  of  moving  the 
hand  or  the  foot  is  said  to  be  independent  of  either  ;  and  the 
workshop  has  been  compared  to  an  engine,  the  parts  of  which 
are  men  !  (Ferguson  on  Civil  Society,  p.  303.)  Dr.  Smith, 
who  has  given  so  admirable  an  exposition  of  the  benefits  which 
society  has  derived  from  the  division  of  labour,  has  notwith- 
standing concurred  Avith  the  popular  prejudices  on  this  subject : 
and  has  gone  so  far  as  to  affirm  that  constant  application  to  one 
particular  occupation  in  a  large  manufactorv.  "necessarily  ren- 


POLITICAL    ECONOMY.  101 

ders  the  workman  as  stupid  and  ignorant  as  it  is  psmbk  io.mn'ie  Difiei^nt     > 
a  hnman  being.'''     Nothing  can  be  more  marvellously  incorrect  o"'capit'ia"'* 
than  these  representations.     Instead  of  its  being  true  that  the  hmJ  industry. 
workmen   employed  in  manufacturing  establishments  are   less 
intelligent  and  acute  than  those  employed  in  agriculture,  the 
fact  is  distinctly  and  completely  the  reverse.     The  weavers, 
and  other  mechanics  of  Glasgow,  Manchester,  and  Birmingham, 
possess  infinitely  more  general  and  extended  information  than  is 
possessed  by  the  agricultural  labourers  of  any  county  in  the  em- 
pire.    And  this  is  really  what  a  more  unprejudic(>d  inquiry  into 
the  subject  would  have  led  us  to  anticipate.     The  variety  of 
the  occupations  in  which  the  husbandman  is  made  successively 
to  engage,  their  constant  liability  to  be  afi'ected  by  so  variable  a 
power  as  the  weather,  and  the  perpetual  change  in  the  appear- 
ance of  the  objects  which  daily  meet  his  eyes,  and  with  which 
he  is  conversant,  occupy  his  attention,  and  render  him  a  stran- 
ger to  that  ennui  and  desire  for  extrinsic  and  adventitious  ex- 
citement which  must  ever  be  felt  by  those  who  are  constantly 
engaged  in  burnishing  the  point  of  a  pin,  and  in  performing  the 
same   endless   routine   of  precisely  similar  operations.     This 
want  of  excitement  cannot,  however,  be  so  cheaply  or  effect- 
ually gratified  in  any  other  way  as  it  may  be  by  cultivating — 
that  is;  by  stimulating  the  mental  powers.     The  generality  of 
workmen  have  no  time  for  dissipation  ;  and  if  they  had,  the 
wages  of  labour  in   all  old  settled  and   densely  peopled  coun- 
tries are  too  low,  and  the  propensity  to  save  and  accumulate  too 
powerful,  to  permit  any  very  large  proportion  of  them  seeking 
to  divert  themselves  by  indulging  in  riot  and  excess.     They  are 
thus  driven  to  seek  for  recreation  in  mental  excitement  ;  and 
the  circumstances  in  which  they  are  placed  aff'ord  them  every 
possible  facility  for  amusing  and  diverting  themselves  in  this 
manner.     By  working  together,  they  have  constant  opportuni- 
ties of  entering  into  conversation  ;  and  a  small  individual  con- 
tribution enables  them  to  obtain  a  large  supply  of  newspapers, 
and  of  the  cheaper  class  of  periodical  publications.    But  what- 
ever diflference  of  opinion  may  exist  respecting  the  cause,  there 
can  be  no  doubt  of  the  fact,  that  the  intelligence  of  the  work- 
men employed  in  manufactures  has  increased  according  as  their 
numbers  have  increased,  and  as  their  employments  have  been 
more  and  more  subdivided.     We  do  not  believe  that  they  ever 
were  less  intelligent  than  the  agriculturists  ;  but  whatever  may 
have  been  the  case  formerl^s  no  one  will  now  venture  to  affirm 
that  they  are  inferior  to  them  in  intellectual  acquirements,  or 
that   they  are    mere   machines   without  sentiment   or  reason. 
Even  Mr.  Malthus,  whose  leanings  are  all  on  the  side  of  agri-  Euiogium  of 
culture,  has  justly  and  eloquently  observed,  that  "  Most  of  the  Mr-  Maitims 
effects  of  manufactures  and  commerce  on  the  general  state  of  lactures. 
society  are  in  the  highejt  degi'ee  beneficial.     They  infuse  fresh 
life  and  activity  into  all  classes  of  the  state,  afford  opportunity 
for  the  inferior  orders  to  rise  by  personal  merit  and  exertion, 
and  stimulate  the  higher  orders  to  depend  for  distinction  upon 
other  grounds  than  mere. rank  and  riches.     They  excite  inven- 
tion ;  encourage  science  and  the  useful  arts  ;    spread  intelli- 
gence and  spirit ;  inspire  a  taste  for  conveniencies  and  comforts 
among  the  labouring  classes  ;  and,  above  all.  give  a  new  and 

13 


•102  T'OLITICAL   ECONOMY. 

.•p)i>r.'irrt .   .  happ'Oi"  structtire  to  society,  by  increasing  the  proportion  of  the 

of'cBpUaT'*  '>niddle  classes — that  body  on  which  the  hberty ,  pubhc  spirit,  and 

and  Industry,  good  government  of  every  country  must  mainly  depend."* — 

(^Observations  on  the  Effects  of  the  Corn  Lazvs,  p.  29.) 

*  This  defence  of  manufactures  is  ingenious,  and  true  in  its  leading  fea- 
tures, and  will,  it  is  to  be  hoped,  serve  to  set  aside  those  sweeping  generali- 
zations by  which  some  writers  have  sought  to  oppose  their  introduction 
into  our  country.  The  evils  of  manufacturing  establishments  are  not  ne- 
cessary but  accidental,  and  may  in  a  great  measure  be  avoided  by  the  pru- 
dent provisions  of  public  authority  or  private  benevolence.  The  very 
necessity  of  such  provisions,  however,  may  justly  be  considered  a  reason 
why  manufacturing  industry  should  not  in  an  equal  choice  of  labour,  be 
preferred  either  by  a  nation  or  individuals.  At  the  same  time,  to  attempt 
its  exclusion  or  delay  when  the  state  of  the  country  calls  for  it,  or  what  is 
equivalent,  when  the  interest  of  individuals  leads  them  to  it,  would  be 
equally  unwise  and  fruitless. 

On  this  course  of  manufacturing  industry,  our  country  has  already  en- 
tered with  success,  and  every  year  will  doubtless  witness  the  introduction 
of  new  varieties  and  higher  grades.  It  may  not,  therefore,  be  without  its 
use  to  consider  the  evils  to  which  such  employments  are  naturally  exposed, 
and  the  remedies  by  which  they  are  to  be  met. 

They  may  be  regarded  as  Physical  and  Moral. 

1.  The  Physical  evils  that  attend  manufacturing  establishments,  arise 
from  confinement — sedentary  employment — the  heated  and  impure  atmos- 
phere of  manufactories — the  temptation  of  too  early  labour  by  the  occu- 
pation of  the  youngest  children,  and  of  over  labour  by  the  introduction  of 
task  work :  hence  the  deformed  frame,  the  sickly  countenance,  the  feeble 
physical  powers  wliich  too  often  mark  the  inhabitants  of  large  manufacto- 
ries, and  painfully  distinguish  them  from  their  more  robust  and  healtliy 
brethren  of  the  country.  That  these  are  CA'ils  not  practically  small  in 
magnitude,  when  private  and  present  interest  is  the  only  governing  prin- 
ciple of  employment,  will  not  be  doubted  by  any  one  who  has  visited  the 
manufactories  of  Europe,  and  by  those  who  have  not,  may  easily  be  ga- 
thered from  the  reports  made  of  them,  from  the  laws  passed  to  regulate 
them,  and  from  the  exertions  of  bencA'olent  individuals  to  remedy  them. 
Among  the  latter,  a  gentleman  now  in  this  country,  Mr.  Robert  Owen, 
of  New  Lanark,  Scotland,  has  practically  shown,  not  only  that  these 
evils  are  not  in  themselves  irremediable,  but  tliat  the  real  interests  of 
the  manufacturer  are  involved  in  that  zeal  and  benevolence  which  alone 
can  overcome  them.  Similar  instances  can  doubtless  be  found  in  oiu" 
own  country,  and  as  one  which  has  fallen  under  the  Editor's  notice, 
may  be  mentioned  the  Cotton  Mill  of  Mr.  M.  Collet,  Patterson,  New 
Jersey.  For  further  views  on  this  subject,  the  student  is  referred  to  Mr. 
Owen's  various  publications,  and  to  a  Review  of  them  in  the  64th  num- 
ber of  the  Edinburgh  Review ;  to  Adam  Smith  ;  to  Say,  book  I.  ch.  8  ; 
to  the  Edinburgh  and  Quarterly  Reviews  on  these  subjects  especially ; 
and  to  the  Reports  of  the  Select  Committee  of  the  House  of  Commons. 

2.  The  second  charge  against  maiuifactures,  arises  from  their  supposed 
demoralizing  and  debasing  influence  ;  and  it  cannot  be  denied  that  it  is  an 
evil  to  which  large  manufactories  from  various  causes  are  peculiarly  ex- 
posed, and  one  that  ought  to  be  guarded  against  by  a  vigilant  internal  po- 
licy, supported  and  enforced  by  the  authority  of  law. 

The  root  of  the  evil  lies  in  that  neglect  of  education  which  is  the  natural 
result  of  the  wages  of  young  children.  Parents,  pressed  by  necessity,  make 
their  children  as  early  as  possible  a  source  of  profit — manufacturers  find 
their  interest  in  employing  them — and  thus  too  frequently  are  tliey  sacri- 
ficed to  the  cupidity  of  parents  and  employers,  and  allowed  to  grow  up  in 
that  ignorance,  which  is  not  only  a  bar  to  future  respectability,  but  the 
strongest  temptation  to  idleness  and  vice.  Against  this  evil,  therefore,  pre- 
sent interest  affords  no  security ;  the  check  must  be  found,  where  a  wise 
parental  affection  is  not  sufficient,  in  the  power  of  law,  or  the  influence  of 
voluntary  associations,  regulating  the  age  and  working  hours  of  children, 
and  making  provision  for  tlieir  sufficient  edncation.  Against  the  immoral 
habits  naturally  consequent  on  such  crowded  and  mixed  associations,  the 
check  must  be  found  in  the  virtue,  firmness,  zeal,  and  benevolence  of  those 
who  have  the  management  of  them. 


POLITICAL  ECONOMY.  103 

Thus,  then,  we  arrive,  by  a  different  route,  at  the  same  re-  Diflercnt 
suit  we  have  already  endeavoured  to  establish.  The  inextin-  of'capitaT'^ 
guishable  passion  for  gain — the  auri  sacra  fames — will  always  andinduBtry. 
induce  capitalists  to  employ  their  stocks  in  those  branches  ofRateotPro- 
industry  which  yiel(t,  all  things  considered,  the  highest  rale  of^y'^"^^^':'^- 
profit.  And  it  is  clear  to  demonstration,  that  those  employments  vuntageor 
which  yield  the  highest  profits,  are  always  those  in  which  it  is  pioymcnts. 
most  for  the  public  interest  that  capital  should  be  invested. 
The  profits  of  a  particular  branch  of  industry  are  rarely  raised 
except  by  an  increased  demand  for  its  produce.  Should  the  de- 
mand for  cottons  increase,  there  would  be  an  increased  compe- 
tition for  them  ;  and  as  their  price  would,  in  consequence,  be 
augmented,  the  manufacturers  would  obtain  comparatively  high 
profits.  But  the  rate  of  profit  in  different  employments  has  a 
natural  tendency  to  equality  :  and  it  can  never,  when  monopo- 
lies do  not  interpose,  continue  either  permanently  higher  or 
lower  in  one  than  in  the  rest.  As  soon,  therefore,  as  the  rise  in 
the  price  of  cottons  had  taken  place,  additional  capital  would 
begin  to  be  employed  in  their  production.  The  manufacturers 
engaged  in  the  cotton  trade  would  endeavour  to  borrow  addi- 
tional capital,  and  the  capitalists  who  were  engaged  in  less  lu- 
crative employments  would  gradually  contract  their  businesses, 
and  transfer  a  portion  of  their  stock  to  where  it  would  yield 
them  a  larger  return.  The  equilibrium  of  profit  would  thus  be 
again  restored.  For  the  additional  capital  employed  in  the  pro- 
duction of  cottons,  by  proportioning  their  supply  to  the  in- 
creased demand,  would  infallibly  reduce  their  price  to  its  pro- 
per level.  Such  is  the  mode  in  which  the  interests  of  indivi- 
duals are,  in  every  case  rendered  subservient  to  those  of  the 
public.  High  profits  attract  capital ;  but  high  profits  in  parti- 
cular businesses  are  the  effect  of  high  prices  ;  and  these  arc 
always  reduced,  and  the  commodities  brought  within  the  com- 
mand of  a  greater  number  of  purchasers,  as  soon  as  additional 
capital  has  been  employed  in  their  production.  It  is  clear,  there- 
fore, that  that  employment  of  capital  is  the  best  which  yields 
the  greatest  profit ;  and  hence,  if  two  capitals  yield  eqxial  pro- 
fits, it  is  a  plain  proof  that  the  departments  of  industry  in  which 
they  are  respectively  invested,  however  much  they  may  differ 

Against  manufacturing  labour  carried  on  in  families  under  parental 
guidance  neither  these  nor  the  former  objections  are  applicable.  An  in- 
stance of  this  may  be  found  in  the  linen  manufacture  of  Ireland  ;  and  it  l~ 
well  deserving  of  philanthropic  consideration  how  far  the  principle  is  ca- 
pable of  application  to  the  various  branches  of  manufactures  so  rapidly 
introducing  into  our  country.  In  cotton  weaving  it  already  exists  to  a  very 
considerable  extent,  and  in  the  neighbourhood  of  Philadelphia,  as  I  am  in- 
formed by  an  intelligent  friend,  is  found  attended  witli  such  advantages 
that  it  is  rapidly  extending. 

That  labours  which  require  the  operation  of  such  securities  to  render 
them  innocent  in  their  effects,  carry  within  themselves  many  arguments 
against  themselves  none  will  deny.  The  health,  the  freedom,  the  varied 
toil,  the  patriotic  attachments  of  the  husbandman  cannot  be  thus  exchan- 
ged, it  would  seem,  without  some  sacrifice  of  personal  happiness,  and  cer- 
tainly not  without  some  risk  of  virtue. 

la  these  considerations  there  is  at  least  argument  sufficient  to  induce  us 
not  to  hurry  the  change.  With  increase  of  population  and  capital,  manu- 
factures ■will  come,  and  when  they  do  come  let  it  be  our  boast,  that  in  this 
as  in  many  other  points  of  national  prosperity,  we  have  the  wisdom  to  at- 
tain the  good  and  avoid  the  evil. — E, 


104  POLITICAL    K.rONOMV. 

Different  ill  mauy  respects,  are  equally  beneficial  to  the  country.*  No- 
o^ca^i™'!"'^  thing  can  be  more  nugatory  than  to  apprehend  that  the  utmost 
and  Industry,  freedom  of  industry  can  ever  be  the  means  of  attracting  capital 
to  a  comparatively  disadvantageous  employment.  If  capital  flows 
to  manufactures  or  commerce  rather  than  to  agriculture,  it  can 
only  be  because  it  has  been  found  to  yield  larger  profits  to  the 
individual,  and  consequently  to  the  state. 

*  In  applying  this  test  to  the  various  employments  of  capital,  there  is 
great  danger  of  drawing  erroneous  inferences  from  insufficient  or  partial 
data.  This  subject,  of  varying  profits,  as  stated  by  a  valued  correspon- 
dent thus  appears  : 

"  Farming  gives  a  remunerating  price  for  labour,  and  from  two  to  three 
per  cent,  on  capital,  including  land  and  stock. 

"  The  retail  merchant  receives  a  remunerating  price  for  his  labour,  and 
twenty-five  per  cent,  on  his  capital. 

"  Manufacturing  gives  a  remunerating  price  for  labour  and  from  ten  to 
thirty  per  cent,  on  capital. 

"  Navigation  pays  insurance  and  repairs,  and  eight  per  cent,  on  capital. 
"  Public  funds  pay  four  'and  a  half  per  cent,  on  capital. 
"  The  mechanic  receives  a  remunerating  price  for  his  labour,  and  one 
hundred  per  cent,  on  his  capital." 

The  above  statement  whether  precisely  accurate  or  not,  exhibits  some 
of  the  apparent  variations  to  which  profits  are  liable.  To  show  that  these 
variations  are  but  apparent,  and  that  capital  under  all  its  various  forms,  is 
productive  of  but  one  average  rate  of  profit,  it  is  sufficient  to  remember 
that  there  is  no  investment  of  it,  but  is  open  to  competition,  and  floating 
capital  in  the  country  sufficient  to  seize  upon  that  whicli  is  most  profitable. 
It  therefore  amounts  to  a  moral  demonstration  that  capital  considered  sim- 
ply as  such,  and  free  to  seek  its  own  investment,  cannot  yield  in  the  same 
country  two  rates  of  profit.  These  facts,  therefore,  assuming  their  truth, 
must  be  otherwise  explained  ;  and  this  explanation  is  to  be  found,  in  ave- 
raging the  returns  of  all  capital  similarly  employed,  in  the  comparative 
security  of  its  difiereut  investments,  in  the  various  degrees  of  skill  and 
devotion  of  time  required  for  its  management,  in  the  superior  indepen- 
dence of  one  occupation  above  another,  and  in  tliose  thousand  nameless 
circumstances  which,  in  the  long  run,  balance  a  varying  account,  and  which, 
to  a  moral  and  sentient  being,  are  equivalent  to  a  monied  consideration. 

Thus,  of  the  instances  enumerated,  but  one  may  be  said  to  give  the  real 
value  of  money,  that  is  an  investment  in  the  public  funds ;  which  by 
the  attractions  of  perfect  security  of  capital  and  perfect  regularity  of  in- 
terest, and  perfect  freedom  from  labour,  bring  the  returns  of  money  down 
to  their  minimum  or  natural  amount.  This  then  is  to  be  considered' as  in 
all  cases  the  real  return  of  capital,  and  the  successive  advances  that  appear 
in  other  investments  as  wages  of  labour,  premiums  of  insurance  against 
risk,  returns  for  previous  capital  invested  in  acquired  skill,  and  the  varied 
compensation  for  peculiar  drudgery  or  disagreeableness  of  vocation. 

But  of  the  returns  from  other  investments  as  above  stated,  that  of  land 
falls  below  the  minimum.  This  apparent  inconsistency,  however,  is  remo- 
ved by  considering  that  a  portion  of  the  real  returns  from  land  are  rein- 
vested in  it,  in  the  shape  of  increased  value.  The  farmer  does  not  take 
from  the  land  all  his  profit,  a  portion  remains  and  is  worked  up  into  his 
capital :  a  further  allowance  to  be  made  on  the  part  of  farming  consists  in 
those  numberless  conveniencies  which  it  afibrds  in  the  support  of  a  family, 
which,  though  they  form  a  real  and  important  return  for  capital,  are  not 
easily  estimated.  These  allowances  would  elevate  the  profits  of  farming 
i;apital  somewhat  above  the  returns  from  stock.  They  stand,  however,  the 
next  to  it — the  native  and  indefeasible  charms  of  a  countiy  life — the  slight 
degree  of  skill  that  is  considered  requisite  to  success  in  it — and  the  perfect  se- 
curity ol'  the  principal  invested  in  it,  induce  men  to  undervalue  the  circum- 
stance of  its  slow  and  doubtful  returns,  and  thus  bring  down  its  profits  the 
nearest  to  tlic  minimum  rate. 

Of  the  other  instances,  it  is  not  necessary  to  enter  into  a  detailed  expla- 
nation. The  principles  already  stated,  will  serve  as  a  guide  to  Uieir  de- 
velopemeut.     See  Edinburgh  Review,  Vol.  XL,  pp.  1.  28. — £. 


POLITICAL  ECONOMY.  10i> 

PART  III. 

DISTRIBUTION  OF  WEALTH. 

Having  thus  endeavoured  to  trace  the  various  methods  by 
which  that  labour  which  is  the  only  source  of  wealth  may  be 
rendered  most  productive,  and  to  exhibit  the  mutual  relation 
and  depcndance  of  the  different  kinds  of  industry,  we  now  pro- 
ceed to  the  second  division  of  our  subject,  or  to  an  investigation 
of  the  laws  regulating  the  proportions  in  which  the  various  pro- 
ducts of  art  and  industry  are  distributed  among  the  various 
classes  of  the  people. 

Sect.  I. — Primary  Division  of  the  Produce  of  Industry — Value 
of  Commodities  measured  in  the  Earliest  Stages  of  Society  by 
the  (Quantities  of  Labour  expended  on  their  Production. 

It  is  self-evident  that  only  three  classes — the  labourers,  the  I'limmy  ni 
possessors  of  capital,  and  the  proprietors  of  land,  are  ever  di-  « ^",',„ °j!  J,'"*' 
rectly  concerned  in  the  production  of  commodities.     It  is  to  intUistiy. 
them,  therefore,  that  all  that  is  derived  from  the  surface  of  the 
earth,  or  from  its  bowels,  by  the  united  application  of  immediate 
labour  and  of  capital,  or  accumulated  labour,  must  primarily  be- 
long.   The  other  classes  of  society  have  no  revenue  except  what 
they  derive  either  voluntarily,  or  by  compulsion,  from  these 
three  classes. 

But  although  there  is  no  state  of  society  in  which  any  other 
class  besides  those  of  labourers,  landlords,  and  capitalists,  par- 
ticipates directly  in  the  produce  of  industry,  there  are  states  of 
society  in  which  that  produce  belongs  exclusively  to  one  only  of 
these  classes  ;  and  others  in  which  it  belongs  to  two  of  them,  to 
the  exclusion  of  the  third.  The  reason  is,  that,  in  the  earliest 
stages  of  society,  there  is  little  or  no  capital  accumulated,  and 
the  distinction  between  labourers  and  capitalists  is,  in  conse- 
quence, unknown  ;  and  that  in  all  newly  settled  and  unappro- 
priated countries,  abundance  of  fertile  land  may  be  obtained 
without  paying  any  rent. 

In  that  remote  period  preceding  the  establishment  of  a  right 
of  property  in  land,  and  the  accumulation  of  capital  or  stock — 
when  men  roamed,  without  any  settled  habitations,  over  the  sur- 
face of  the  earth,  and  existed  by  means  of  that  labour  only  that 
was  required  to  appropriate  the  spontaneous  productions  of  the 
soil,  the  whole  produce  of  labour  would  belong  to  the  labourer,  Quantity  of 
and  the  quantity  of  labour  that  had  been  expended  in  the  pro-  ^,^^.?."'^  '|"^ 
curing  of  different  articles,  would  plainly  form  the  only  standard  Pnndpu/of 
by  which  their  relative  worth,  or  exchangeable  value,  could  be  ^'^'"'=- 
estimated.*     "  If  among  a  nation  of  hunters,"  says  Dr.  Smith, 

*  That  the  quantity  of  labour  worked  up  in  the  commodity  constitutes, 
at  this  early  period,  the  only  measure  of  value  is  evident,  and  by  all  ad- 
mitted. But  that  in  a  state  of  society  so  different  as  that  which  follows, 
where  both  labour  and  capital  operate  in  production,  labour  should  still 
continue  to  afford  the  sole  measure  of  value,  as  our  author  and  the  school 
of  Ricardo  maintain,  seems  in  no  small  degree  inconsistent,  not  only  with 
experience  but  with  their  own  language  and  reasoning.  For  if  this  be  so, 
there  is  no  ground  for  the  distinction  here  adopted,  of  difi'erent  states  of 


106  POLITICAL    ECONOMY. 

Quantity  of  "  it  usually  costs  twice  the  labour  to  kill  a  beaver  that  it  does  to 
n-'ukiL^*'  kill  a  deer,  one  beaver  would  naturally  exchange  for  or  be  worth 
Principle  of  two  deer.  It  is  natural,  that  what  is  usually  the  produce  of  two 
^  "''"'■  days'  or  two  hours'  labour,  should  be  worth  double  of  what  is 
usually  the  produce  of  one  day's  or  one  hour's  labour. 

"  If  the  one  species  of  labour  should  be  more  severe  than 
the  other,  some  allowance  will  naturally  be  made  for  this  supe- 
rior hardship  ;  and  the  produce  of  one  hour's  labour  in  the 
one  way,  frequently  exchanges  for  that  of  two  hour's  labour  in 
the  other. 

"Or  if  the  ^ne  species  of  labour  requires  an  uncommon  degree 
of  dexterity  and  ingenuity,  the  esteem  which  men  have  for  such 
talents  will  naturally  give  a  value  to  their  produce,  superior  to 
what  would  be  due  to  the  time  employed  about  it.  Such  talents 
can  seldom  be  acquired  but  in  consequence  of  long  application, 
and  the  superior  value  of  their  produce  may  frequently  be  no 
more  than  a  reasonable  compensation  for  the  time  and  labour 
which  must  be  spent  in  acquiring  them.  In  the  advanced  state 
of  society,  allowances  of  this  kind,  for  superior  hardship  and 
superior  skill,  are  commonly  made  in  the  wages  of  labour  ;  and 
something  of  the  same  kind  must  probably  have  taken  place  in 
the  earliest  and  rudest  period. 

"  In  this  state  of  things,  the  whole  produce  of  labour  belongs 
to  the  labourer  ;  and  the  quantity  of  labour  commonly  employed 
in  acquiring  or  producing  any  commodity,  is  the  only  circum- 
stance which  can  regulate  the  quantity  of  labour  (q/"  other  com- 
modities) which  it  commonly  ought  to  purchase,  command,  or 
exchange  for." — (IVealth  of  Nations,  Vol.  I.  p.  70.) 

Thus  far  there  is  no  room  for  doubt  or  diflference  of  opinion. 
When  there  is  no  class  but  labourers,  all  the  produce  of  labour 
must  obviously  belong  to  them  ;  and  the  quantity  of  labour  re- 
quired to  produce  commodities  must  form  the  onl}^  standard  by 
which  their  exchangeable  worth  or  value  can  be  estimated.  It 
is  at  this  point,  therefore,  that  we  are  to  begin  the  investigation 
of  the  laws  regulating  the  division  of  the  pi'oduce  of  industry 
among  the  three  great  classes,  of  labourers,  capitalists,  and  land- 
lords ;  and  we  shall  do  this  by  endeavouring,  in  the  first  place, 
to  acquire  a  knowledge  of  the  laws  which  regulate  the  exchange- 
able value  of  commodities  in  an  advanced  period  of  society., 
when  circulating  and  fixed  capital  are  employed  in  their  pro- 
duction, and  when  land  is  appropriated,  and  rent  paid.  A  pre- 
vious acquaintance  with  the  circumstances    which  determine 

society,  or  of  the  different  classes  to  whom  in  those  states  the  produce  of 
industry  respectively  belongs.  If  all  value  be  resolvable  into  labour  be- 
cause capital  is  but  another  name  for  accumulated  labour,  then  interest  is 
but  another  name  for  wages,  and  capitalists  for  workmen,  and  every  state 
of  society  is  resolvable  into  its  first  and  only  one.  This  confounding  of 
terms,  ordinarily  and  necessarily  distinguished,  would,  it  is  evident,  render 
science  nugatory, — but  it  is  the  obvious  result  of  that  analysis  which  re- 
fines capital  into  labour.  If  they  cannot  in  every  case  be  comprehended 
under  the  same  term,  they  ought  not  in  any, — if  a  capitalist  differ  from  a 
workman,  capital  differs  from  labour, — and  if  labour  be  the  criterion  of 
value  where  labour  only  is  employed,  a  new  element  must  certainly  be 
brought  into  calculation  when  the  agency  of  capital  is  further  added.  The 
necessity  of  the  distinction  may  also  be  sliown  by  the  different  laws  they 
obey, — the  consideration  of  this,  liowever,  is  deferred  to  Sect.  IV.  of  tlie 
present  part.     See  Malthus,  Chap.  II.  Sect.  2,  3,  4,  6. — E. 


POLITICAL  ECONOMY.  107 

the  value  of  commodities,  will  be  found  to  be  indispensable  to  Equality  of 
enable  us  to  ascertain  the  principles  which  regulate  their  dis-  Y^oixs. "" 
tribution. 

Sect.  II. — Preliminary  Considerations — Equality  of  Wages  and 
Profits — Inquiry  into  the  Effect  of  Variations  of  Demand  and 
Supply  071  Price — Cost  of  Production  shown  to  be  its  regulating 
Principle. 

If  the  popular  opinions  on  this  subject  were  well  founded,  Preliminary 
the  inquiry  on  which  we  are  now  about  to  enter  might  be  dis- tions!  ""^ 
posed  of  in  a  very  few  words.  The  exch.ingeable  value  of  com- 
modities, when  compared  with  each  other,  and  their  value  or 
price  when  compared  with  money,  is  held  almost  universally  to 
depend  on  their  relative  abundance  or  scarcity  in  the  market, 
compared  with  the  demand.  We  believe,  however,  that  we  shall 
be  able  to  show,  that  this  opinion  rests  on  no  good  foundation, 
and  that  it  is  the  cost  of  production  which  is  the  sole  regulating 
principle  of  price.  But,  before  proceeding  further,  it  is  neces- 
sary, in  order  to  facilitate  our  investigations  in  this  and  the  fol- 
lowing sections,  to  premise,  that  wherever  industry  is  free,  the 
rate  of  wages  earned  by  the  labourers  engaged  in  any  particular 
department  of  industry,  and  the  rate  of  profit  derived  from  the 
capital  vested  in  it,  cannot,  for  any  considerable  period,  either 
fall  below,  or  rise  above,  the  rate  of  wages  and  pnfits  accruing 
to  the  labo7irers  and  capitalists  engaged  in  other  departments. 

With  regard  to  the  first  of  these  positions,  or  to  the  equality  E.jiiaiity  of 
of  the  wages  earned  by  the  labourers  engaged  in  different  em-  |,ari?^d  w^fhe 
ployments,  it  is  not  meant  to  infer  that  all  labourers  receive  Labourers 
precisely  the  same  sum  of  money,  or  the  same  proportional  ^"lerlnt '" 
share  of  the  produce  of  their  labour.     Such  an  opinion  would  Branches  of 
be  equally  at  variance  with  the  fact, — and  with  the  principle  it  "  "^"^" 
is  our  object  to  elucidate.     Wages  are  a  compensation  given  to 
the  labourer  in  return  for  the  exertion  of  his  physical  powers, 
or  of  his  skill,  or  ingenuity.     They  must,  therefore,  vary  ac- 
cording to  the  greater  intensity  of  the  labour  to  be  performed, 
and  to  the  degree  of  skill  and  ingenuity  required.    Wages  would 
not  be  equal  if  a  jeweller  or  engraver,  for  example,  received  no 
higher  rate  than  a  common  farm  servant,  or  a  scavenger.    A  long 
course  of  training  is  required  to  instruct  a  man  in  the  business 
of  jewelling  and  engraving  ;  and  if  this  were  not  compensated, 
by  a  higher  rate  of  wages,  it  is  evident  no  one  would  choose  to 
learn  so  difficult  an  art ;  but  would  addict  himself  in  preference 
to  such  employments  as  hardly  require  any  training.     The  cost 
of  producing  artificers,  or  labourers,  regulates  the  wages  they 
obtain,  precisely  in  the  same  way  that  the  cost  of  producing 
commodities  regulates  their  value.     A  man  who  practises  a  dit- 
ficult  or  nice  business,  loses  all  the  time  that  is  spent  in  his  ap- 
prenticeship, and  generally  also  the  clothes  and  provisions  con- 
sumed by  him  during  the  same  period.     This  person  ought, 
therefore,  to  obtain  not  only  the  same  rate  of  wages  as  hus- 
bandry labourers,  and  those  who  do  not  require  to  serve  an  ap- 
prenticeship, but  he  ought  also  to  obtain  an  additional  rate  pro- 
portioned to  the  extra  time  and  expense  spent  in  learning  his 
business.     If  he  does  not  obtain  this  additional  rate,  it  is  plain 


108  POLITICAL  ECONOMY. 

Equality  of  hc  would  not  be  SO  wcll  paid  as  the  husbandry  labourers  ;  and 
Proms!""  if  he  obtained  more  than  what  was  a  fair  and  reasonable  com- 
pensation for  the  greater  expense  to  which  he  had  been  put, 
there  would  be  an  immediate  influx  of  labourers  into  that  par- 
ticular business,  and  competition  would  not  fail  to  reduce  wages 
to  their  proper  level. 

Besides  tliis  prominent  cause  of  apparent  inequality,  wages 
vary  in  amount  proportionably  to  the  ease  and  hardship,  the 
agreeableness  and  disHgreeableness,  the  constancy  and  incon- 
stancy of  employment.*  In  the  greater  part  of  manufactures, 
a  journeyman  may,  except  in  periods  of  general  revulsion,  ge- 
nerally be  able  to  obtain  constant  employment.  But  there  are 
several  businesses,  such,  for  example,  as  those  of  masons  and 
bricklayers,  that  can  neither  be  carried  on  in  hard  frost  nor  foul 
weather.  Their  earnings  must  therefore  be  able  not  only  to 
maintain  them  while  they  are  employed,  but  also  while  they  are 
idle,  and  to  make  them  some  compensation  for  those  anxious  and 
desponding  moments  which  the  thought  of  so  precarious  a  situ- 
ation must  sometimes  occasion.  "  Hence,"  says  Dr.  Smith, 
"  where  the  daily  earnings  of  the  greater  number  of  manufac- 
turers are  nearly  upon  a  level  with  the  daily  earnings  of  the 
superior  class  of  farm  servants,  the  wages  of  masons  and  brick- 
layers are  generally  from  fifty  to  one  hundred  per  cent,  higher. 
Where  common  labourers  earn  four  or  five  shillings  a  week, 
masons  and  bricklayers  frequently  earn  seven  and  eight ;  and 
where  the  former  earn  nine  or  ten,  the  latter  commonly  earn 
fifteen  and  eighteen." — (JVealth  of  JVations,  I.  p.  157.) 

*  To  this  may  be  added  the  comparative  respect  or  disgrace  attached  to 
the  occupation, — which,  in  the  higher  divisions  of  the  industrious  classes 
of  society,  has  an  important  influence.  It  may  here  be  necessary  to  pre- 
mise, that  the  term  wages  in  its  scientific  meaning  is  not  confined  to  ma- 
nual labourers,  but  applies  generally  to  all  who  derive  their  support,  not 
from  capital  or  land,  but  from  personal  exertion, — including  all  salaried 
officers,  men  of  science,  professional  men,  and  artists,  and  forming  what 
.Say  terms  the  "  industrious  class."  Thus  Adam  Smith  remarks  that  the 
scholar,  the  poet,  and  the  philosopher,  are  mamly  paid  in  personal  conside- 
ration, while  the  actor  and  the  dancer  are  overpaid  for  their  talents  for  the 
very  reason  that  their  persons  are  despised.  This  is  painfully  illustrated 
among  ourselves,  by  the  very  low  salaries  to  which  the  support  of  the 
covmtry  clergy  is  reduced,  frequently  not  going  beyond  the  wages  of  a  day 
labourer.  It  is  well  that  higher  motives  should  tempt  to  the  profession,  but 
it  is  not  well  that  those  motive*  should  be  turned  against  the  individual  to 
diminish  both  his  comforts  and  his  influence,  and  his  conscientiousness  be 
made  a  plea  for  his  starvation. 

The  case  of  men  of  science  was  not  fully  analyzed  by  Smith, — this 
was  reserved  for  Say ;  who,  while  he  elevates  them  into  the  prime 
movers  of  national  wealth,  explanis  also  the  reasons  why  they  in  general 
partake  of  so  little  of  it.  This  arises  from  the  productions  which  they 
furnish  of  scientific  truth  being  in  their  nature  inconsumable.  They  are 
paid  for  them  once  while  those  who  apply  them  are  paid  upon  each 
successive  reproduction.  Thus  the  inventor  starves  amid  the  riches 
which  he  has  himself  created.  Could  the  family  of  Fulton,  for  instance, 
receive  one-thousandth  part  of  the  wealth  which  his  successful  experi- 
ment is  annually  producing  in  this  country,  they  would  not  now  liave 
to  depend  ujion  the  slow  returns  of  public  gratitude.  The  fruits  of  a 
man's  mental  labour  are  peculiarly  his  own  ;  and  if  society  become  the 
purchaser  of  them,  it  should  be  at  an  adequate  price ;  rewarding'  inge- 
nuity and  talent  with  some  reasonable  proportion  of  the  mines  of  wealth 
which  it  opens  to  the  community.  See  Say,  Book  II.  chapter  vii.  9C§t.  2. 
Smith,  Book  I.  chap,  x, — E. 


i'OLlTICAL    ECONOMV.  i  0^ 

f 

But  these  variations,  instead  of  being  inconsistent  with  the  Equality  of 
principle  we  have  been  entleavonring  to  establish,  plainly  result  proifu^"" 
from  it.  The  wages  earned  by  different  classes  of  workmen  are 
equal,  not  when  each  earns  the  same  number  of  shillings  or  of 
pence,  in  a  given  space  of  time — but  when  each  is  ])aid  in  pro- 
portion to  the  severity  of  the  labour  he  has  to  perform,  to  the 
degree  of  previous  education  and  of  skill  that  it  requires,  and 
to  the  other  causes  of  variation.  So  long,  indeed,  as  the  prin- 
ciple of  competition  is  allowed  to  operate  without  restraint,  or 
so  long  as  each  individual  is  allowed  to  employ  himself  as  he 
pleases,  we  may  be  assured  that  the  higgling  of  the  market  will 
always  adjust  the  rate  of  wages  in  different  employments  on  the 
principle  we  have  now  mentioned,  and  that  it  will  be  very  nearly 
equal.  If  the  rate  of  wages  in  one  department  were  depressed 
below  the  common  level,  labourers  would  leave  it  to  go  to 
others  ;  and  if  it  were  to  rise  above  this  common  level,  then,  it 
is  plain,  labourers  would  be  attracted  from  those  departments 
where  wages  were  lower,  until  the  increased  supply  had  sunk 
them  to  their  just  level.  A  period  of  greater  or  less  duration, 
according  to  the  circumstances  of  the  country  at  the  time,  is 
always  required  to  bring  about  this  equalization.  But  all  the- 
oretical inquiries,  and  such  as  have  the  establishment  of  princi- 
ples for  their  object,  either  are,  or  ought  to  be  founded  on  pe- 
riods of  average  duration  ;  and  whenever  such  is  the  case,  we 
may  always,  without  occasioning  the  slightest  error,  assume,  that 
the  wages  earned  in  different  employments  are,  all  things  con- 
sidered, precisely  equal. 

In  like  manner  the  profit,  accruing  to  the  cnpitaUsts  engaged  Eq"^i'^'y^«'' 
in  different  businesses  must  always  vary  proportionably  to  the  of  the  Capi- 
greater  or  less  risk,  and  other  circumstances  specially  affecting  [,f  dtfiSeT*^ 
the  capital  they  employ  in  them.     It  is  obvious,  indeed,  that  Busit^sscs. 
profits  have  not  attained  their  level  until  they  have  been  adjusted 
so  as  to  balance  these  different  advantages  and  disadvantages. 
None  would  engage  in  unusually  hazardous  undertakings,  if  the 
capital  employed  in  them  only  yielded  the  same  profit  that  might 
have  been  obtained  by  employing  it  in  more  secure  businesses. 
No  one  would  choose  voluntarily  to  place  his  fortune  in  a  situa- 
tion of  comparative  danger.     Wherever  there  is  extraordinary 
risk,  that  risk  must  be  compensated.     And  hence,  the  well 
known  distinction  between  gross  and  tiett  profit.*     Gross  profit 

*  Another  necessary  caution,  is  to  remember,  that  it  is  not  the  profits  ol 
the  individual  but  of  the  business  at  large,  as  including  all  who  are  enga- 
ged in  it,  of  which  equality  is  asserted.  While  of  two  men  equally  com- 
petent and  economical,  one  grows  rich  and  the  other  poor,  it  would  evi- 
dently be  absurd  to  assert  that  the  profits  of  each  are  equal.  But  taking 
into  one  common  calculation,  the  gains  and  losses  of  all  engaged  in  the 
same  business  or  profession,  it  will  be  found  that  they  nearly  balance  those 
of  any  other,  supposing  the  same  capital  to  be  employed.  The  cause  of 
the  apparent  variation  is,  that  in  different  professions  profits  are  differently 
divided  among  the  individuals  engaged  in  it.  In  farming,  for  instance,  with 
comparative  equality, — in  commerce  and  the  learned  professions  with  great 
disparity.  The  chance  of  success  in  the  various  occupations  of  life,  may 
be  compared  to  lotteries  of  different  schemes, — in  some  numerous  small 
prizes  and  few  or  no  blanks, — in  others  many  blanks,  but  with  the  tempta- 
tion of  a  few  capital  prizes.  The  latter  illustrates  the  hazards  of  business 
and  of  professional  life.  ''In  a  profession,*'  says  Smith,  "Avhere  twenty 
lail  ibr  one  that,  succeeds,  that  one  ought  to  gain  all  that  should  have  been 

14 


110  POLITICAL  i:co.\o:m\% 

Knuaiityof  ahvuys  varies  according  to  the  risk,  the  respectability,  and  the* 
Vtoiil^'^'^  agreeableness  of  different  employments,  while  nett  profit  is  the 
same  or  very  nearly  the  same,  at  any  particular  period,  in  them 
all.  A  gunpowder  manufacturer,  for  examp]e,must  obtain  as  much 
profit,  over  and  above  the  profit  obtained  from  the  capital  engaged 
in  the  securest  bu.sinesses,  as  will  suffice  to  guarantee  or  insure 
his  capital,  from  the  extraordinary  risk  to  which  it  is  exposed, 
in  a  business  of  such  extreme  hazard.  If  the  gunpowder  maau- 
facturer  were  to  obtain  more  than  this  rate,  additional  capital 
would  be  attracted  to  his  business,  and  if  he  were  to  obtain  less, 
lie  would  withdraw  capital  from  it.  The  great  and  constantly 
acting  principle  of  competition,  or,  which  is  just  the  same  thing, 
the  self-interest  of  every  individual  will  never  permit  the  wages 
or  the  profits  obtained  by  any  particular  set  of  workmen  or 
capitalists,  taking  all  things  into  account,  to  continue  either  long 
below  or  long  above  the  common  and  average  rate  of  wages  and 
profits  obtained  by  those  who  are  employed,  or  who  have  capital 
invested  in  other  businesses.  It  is  by  this  common  standard  that 
the  wages  and  profits  of  particular  businesses  are  always  regu- 
lated ;  they  can  never  diverge  considerably  from  it ;  they  have 
a  constant  tendency  to  equalization  ;  and  may,  in  all  theoretical 
inquiries,  be  supposed,  without  occasioning  any  error  of  conse- 
quence, exactly  to  coincide. 

The  principle  of  the  equality,  or  rather  of  the  constant  ten- 
dency to  equality,  of  the  wages  earned  by  the  labourers,  and  of 
the  profits  derived  from  the  capital  employed,  at  the  same  time . 
in  all  the  various  branches  of  industry,  was  pointed  out  by  Mr. 
Harris,  and  also  by  Mr.  Cantillon,  in  his  work  entitled,  The  Ana- 
lysis of  Trade,  &,c.  publishetl  in  1759  ;  but  it  was  first  fully  de- 
monstrated in  the  eighth,  ninth,  and  tenth  chapters  of  the  first 
book  of  the  Wealth  of  Nations.  The  establishment  of  this  prin- 
ciple %vas  one  of  the  greatest  services  rendered  by  Dr.  Smith  to 
the  science  of  Political  Economj'.  Nothing  can  be  clearer, 
more  convincing  and  satisfactory,  than  his  reasoning  on  this  sub- 
ject. The  equality  of  wages  and  of  profits  has,  ever  since  the 
publication  of  his  work,  been  always  assumed  as  admitted  and 
incontestible. 
t-r'^Demand  '^^^^  principle  of  the  equality  of  wages  and  profits  once  es- 
und  Supply  tablished,  it  is  easy  to  show  that  variations  in  the  demand  and 
mrnenUiT'  supply  of  Commodities  can  exert  no  lasting  influence  on  price. 
fluenceon  Jt  is  the  cost  of  production — denominated  by  Smith  and  the  Mar- 
quis  (jrarnier  necessary  or  natural  price — which  is  the  perm-a- 
iient  and  ultimate  regulator  of  the  exchangeable  value  or  price 
of  every  commodity  which  is  not  subjected  to  a  monopoly,  and 
-.chich  may  be  indefinitely  increased  in  quantity  by  the  application  of 
fresh  capital  and  labour  to  its  production.  That  the  market 
price  of  such  commodities  and  the  cost  of  production  do  not  al- 

gained  by  the  unsuccessful  twenty."  Thus  it  is  perfectly  fair  that  some 
great  fortunes  should  grow  out  of  commerce  when  so  many  are  lost  by  it, 
— that  a  few  lawyers  and  physicians  should  be  in  ^reat  receipts  as  a  coun- 
terbalance to  those  who  starve.  These  few  splendid  prizes  give  reputation 
at  a  distance  to  the  scheme  that  involves  them,  but  like  other  schemes  of 
ihancc  tliey  are  fallacious,  they  tempt  into  them  more  adveutureis  than 
they  can  maintain, — a  consideration  that  sliould  tend  to  content  the  fanner 
.in  the  enjoyment  of  liis  more  moderate,  because  uiore  equal  and  cerUun.. 
»aiiis, —  K, 


POLITICAL    ECONOMY.  Ill 

ways  coincide  is  certain  ;  but  they  cannot,  for  any  considerable  Equality  of 
period,  be  far  separated, and  have  a  constant  tendency  to  equality.  Pfjlt'^* '"' 
It  is  plain  that  no  man  will  continue  to  produce  commodities  if 
they  sell  for  less  than  the  cost  of  their  production — that  is,  for 
less  than  will  indemnify  him  for  his  expenses,  and  yield  him  the 
common  and  average  rate  of  profit  on  his  capital.  This  is  a 
limit  below  which  it  is  obviously  impossible  prices  can  be  per- 
manently reduced  ;  and  it  is  equally  obvious,  that  if  they  were, 
for  any  considerable  period,  to  rise  above  it,  additional  capital 
would  be  attracted  to  the  advantageous  business,  and  the  compe- 
tition of  the  producers  would  lower  prices. 

A  demand,  to  be  effectual,  must  be  such  as  will  cover  the  ex-TheVViii 
pense  of  production.  If  it  is  not  suflicient  to  do  this,  it  can  polve'rto 
never  be  a  means  of  causing  commodities  to  be  produced  and  I'urciiasc 
brought  to  market.  A  real  demander  must  have  the  power,  as  constftu'e 
well  as  the  will,  to  purchase.  A  person  with  20s.  in  his  pocket  i^'^'n^nd. 
may  be  as  anxious, — nay,  he  may  be  ten  times  more  anxious,  to 
become  the  purchaser  of  a  coach  than  of  a  hat  ;  why  then  does 
he  not  obtain  the  one  as  readily  in  exchange  for  his  20s.  as  the 
other  ?  The  reason  is  obvious — 20s.  will  pay  the  expense  of 
producing  the  one,  and  it  will  not  pay  the  expense  of  producing 
the  other.  But  if  such  an  improvement  were  to  take  place  in 
the  art  of  coachmaking,  as  would  enable  any  one  to  produce  a 
coach  as  cheaply  as  a  hat,  then  20s.  would  buy  a  coach  as  easily 
as  it  can  now  buy  a  hat.  The  demand  for  any  particular  com- 
modity may  become  ten  or  ten  thousand  times  more  extensive, 
or  it  may  decline  in  the  same  proportion  ;  but  if  the  cost  of  its 
production  continues  the  same,  no  permanent  variation  will  be 
occasioned  in  its  price.  Suppose,  for  example,  that  the  demand 
for  hats  is  suddenly  doubled,  that  circumstance  would  undoubt- 
edly occasion  a  rise  of  price,  and  the  hatters  would,  in  conse- 
quence, make  large  profits  ;  but  this  rise  could  only  be  of  very 
limited  duration  ;  for  the  large  profits  would  immediately  attract 
additional  capital  to  the  hat  manufacture  ;  an  increased  supply  of 
hats  would  be  brought  to  market,  and  if  no  variation  took  place 
in  the  cost  of  production,  their  price  would  infallibly  sink  to  its 
former  level.  Suppose,  on  the  other  hand,  that  the  demand  for 
hats  is  increased  a  thousand  fold,  and  the  cost  of  producing  them 
diminished  in  the  same  proportion,  we  should,  notwithstanding 
the  increased  demand,  be  able,  in  a  very  short  time,  to  buy  a  hat 
for  the  thousandth  part  of  what  it  now  costs.  Again,  suppose 
the  demand  for  hats  to  decline,  and  the  cost  of  producing  them 
to  increase,  the  price  would,  notwithstanding  the  diminished 
demand,  gradually  rise,  till  it  had  reached  the  point  at  which  it 
would  yield  the  hatters  the  common  and  average  rate  of  profit 
on  the  capital  employed  in  their  business.  It  is  admitted  that 
variations  in  the  demand  and  supply  occasion  temporary  varia- 
tions of  price.  But  it  is  essential  to  remark,  that  these  variations 
are  only  temporary.  It  is  the  cost  of  production  that  is  the  grand 
regulator  of  price — the  centre  of  all  those  transitory  and  eva- 
nescent oscillations  on  the  one  side  and  the  other  ;  and  whei'ever 
industry  is  free,  the  competition  of  the  producers  will  always  ele- 
vate or  sink  prices  to  this  level.* 

•"*  That  the  cost  of  production  is  the  regulator  of  price,  is  one  of  the  , 

leadinsr  doctrines  of  the  modern  school  of  Ricardo.     The  doctrine  of  tl»e 


112  I'OMTICAL    ECONOMY. 

Cost  of  Pro-      In  certain  branches  of  industry,  such,  for  example,  as  agri- 

r^g'iliating^    culture,  uhlch  are  liable  to  be  seriously  affected  by  the  varia- 

Principie  of  tions  of  the  scasons,  and  from  which  capital  cannot  be  easily 

withdrawn,  there  is  a  somewhat  longer  interval  than  in  others, 

older  school  of  Adam  Smith,  teaches  lliat  it  is  regulated  by  demand  and 
supply,  and  the  advocates  of  each  maintain  their  respective  sentiments 
with  more  zeal  and  pertinacity,  than  should  belong  to  opinions  which  may 
be  made  harmoniously  to  unite.  For  the  doctrine  of  Adam  Smith,  see 
Wealth  of  Nations,  Book  I.  chap.  v.  and  vii.  Malthus,  Chap.  ii.  sect.  3. 
Quarterly  Review,  Vol.  XXX.  p.  314.  For  the  exposition  and  defence  of 
the  later  doctrine,  see  Ricardo,  Polit.  Econ.  Chap.  XXX.  Mill,  Chap.  III. 
Westminster  Review,  No.  4,  Art.  1. 

For  a  clear  understanding  of  this  subject,  the  student  must  first  make 
himself  familiar  with  the  distinction  between  the  natural  and  market  price 
of  commodities ;  and  in  the  relation  they  bear  to  each  other  he  will  see  the 
means  of  uniting  these  apparently  discordant  opinions!  Natural  price  be- 
ing governed  solely  by  the  costs  of  production,  while  actual,  or  market 
price  is  governed  by  the  general  control  of  the  costs  of  production,  specifi- 
cally modified  by  the  influence  of  demand  and  supply.  In  this  subjection 
of  market  price  to^the  control  of  two  regulating  forces,  it  may  be  likened  to 
the  state  of  a  satellite,  which  revolving  around  its  primary  planet,  its  actual 
position  is  the  result  of  the  laws  of  motion  which  regulate  both.  Thus  of 
market  price,  natural  price  may  be  said  to  be  the  primary,  about  which  the 
former  like  a  satellite  is  continually  revoh'ing,  moving  as  it  moves,  and  yet 
governed  by  its  own  laws  of  motion.  As  natural  price  by  a  straight  for- 
ward movement,  rises  or  falls  with  the  increase  or  diminution  of  the  costs 
of  production,  market  price  accompanies  it  with  its  ceaseless  oscillations, 
with  a  constant  tendency  to  settle  at  it  as  its  centre,  but  for  ever  thrown 
beyond  it  by  the  successive  reaction  of  demand  on  the  one  hand  and  supply 
on  the  other. 

If  this  illustration  be  correct,  both  opinions  are  true  to  a  certain  extent, 
and  both  defective  if  exclusively  held  :  gradual  and  permanent  changes  of 
price  are  the  result  of  corresponding  alterations  in  the  cost  of  production  : 
sudden  and  temporary  changes  are  the  result  of  comparative  demand  and 
supply ;  and  actual  price  is  the  result  of  the  operations  of  both.  Asa  prac- 
tical principle  the  doctrine  of  Adam  Smith  is  the  most  valuable,  since  it 
is,  First,  of  universal  application,  being  equally  true  of  all  commodities, 
whether  in  state  of  monopoly  or  of  free  competition ;  and  Secondly,  of 
practical  application,  as  it  relates  to  that  actual  market  price  upon  which 
the  profits  of  individuals  depend. 

The  doctrine  of  Ricardo,  though  essentially  true,  is  yet  modified  by  so 
many  and  such  powerful  causes,  as  to  render  it  inapplicable  in  many  very 
important  cases.  That  the  costs  of  production  form  tlie  central  point,  about 
%vliich  market  price  oscillates,  is  admitted.  These  oscillations,  however, 
are  slow  or  rapid  in  proportion  to  the  rapidity  of  production  and  consump- 
tion,— the  more  rapid  these  are,  the  more  does  the  market  price  coincide 
with  the  natural, — the  slower  they  are,  the  greater  may  be  their  deviation, 
and  the  longer  the  period  which  must  elapse  before  the  costs  of  production 
can  regulate  the  price.  This  may  be  instanced  in  the  case  of  shipping  and 
buildings,  which  are  slowly  consumed, — of  skill  and  learning,  which  are 
slowly  acquired, — the  effect  of  which  often  is,  in  the  case  of  the  former,  to 
retain  market  price  below  natural  price ;  and  of  the  latter,  above  it  for 
years  together. 

Another  case  may  be  stated,  in  which  centuries  may  elapse  before  such 
regulation  takes  place  :  of  this  our  own  country  furnishes  an  example. 

The  natural  price  of  labour  is,  the  lowest  rate  of  wages  by  which  the 
labourer  and  his  children  can  be  supported.  The  market  price  of  it,  in 
new  and  fertile  countries,  is  always  far  beyond  it,  and  will  so  continue 
under  a  liberal  policy,  until  a  crowded  population  produces  a  competition 
for  employment  and  brings  it  down  to  its  minimum,  or  natural  price. 
How  far  we  are  removed  from  that  point,  will  be  best  seen  by  comparing 
the  situation  of  our  labourers  with  those  abroad  See  Quarterly  Review, 
No.  56,  Art.  4.  Edinburgh  Rev.  No.  71,  Art.  6.  Quarterly  Rev.  Colquhouii 
on  Condition  of  the  Poor,  Vol.  VIII.  p.  319.  XII.  p.  146.  Report  of  Select 
Committee,  Vol.  XIX.  p.  492.— £. 


rOLITICAL    ECONOMY*  llo 

before  the  market  price  of  produce  and  the  cost  of  producing  coBtof  Pro- 
jt  can  be  equalized.  But  that  such  an  equalization  will  be  brought  '/"I^^'iaJln"^' 
about  in  the  end  is  absolutely  certain.  No  farmer,  and  no  pro-  PrMicipio'"oi' 
ducer  whatever,  will  continue  to  bring  corn  or  other  products 
to  market,  if  they  do  not  sell  for  such  a  price  as  will  pay  the  ex- 
pense of  their  production,  including  therein  the  common  and 
average  rate  of  profit  on  the  capital  employed  by  them.*  An 
excess  of  supply  has  now  (January  1823)  depressed  the  prices 
of  corn  and  other  farm  produce  below  this  level  ;  and  the  occu- 
piers of  poor  land  are,  in  consequence,  involved  in  the  greatest 
difficulties  ;  but  most  assuredly  this  glut  will  not  continue.  A 
part  of  the  cultivators  of  poor  soils  will  be  driven  from  their 
employment.  A  smaller  supply  will  be  brought  to  market ;  and 
prices  will  be  adjusted  so  as  to  yield  the  customary  rate  of  profit, 
and  no  more,  to  the  agriculturists  who  continue  the  cultivation  of 
the  poorest  soils. — The  self-interest  of  the  cultivators  will  not 
permit  prices  to  be  permanently  depressed  below  this  level  ; 
and  the  self-interest  of  the  public  will  not  permit  them  to  be 
permanently  raised  above  it ;  for,  if  they  were  raised  above  it, 
then  the  cultivators  would  gain  more  than  the  common  and 
average  rate  of  profit,  and  capital  would,  of  course,  be  imme- 
diately attracted  to  agriculture,  and  would  continue  flowing  in 
that  direction,  until  the  natural  and  indestructible  equilibrium  of 
profit  had  been  restored — that  is,  as  we  shall  afterward  show, 
imtil  the  price  of  agricultural  produce  had  fallen  to  such  a  sum 
as  would  just  yield  the  average  rate  of  profit  to  the  cultivators 
of  the  worst  soils,  or  the  improvers  of  the  best.  This  is  the 
point  at  which  average  prices  must  continue  stationary,  or  about 
which  market  prices  must  oscillate,  until  the  cost  of  production 
be  increased  or  diminished.  If  any  great  discovery  were  made 
in  agriculture — such  a  discovery,  for  instance,  as  would  reduce 
the  cost  of  cultivation  a  half,  the  price  of  agricultural  produce 
would  fall  in  the  same  proportion,  and  would  continue  to  sell  at 
that  reduced  rate  until  the  increase  of  population  forced  re- 
course to  soils  of  a  decreasing  degree  of  fertility.  Whenever 
this  took  place,  prices  would  again  rise.  Why  is  the  price  of 
corn  almost  invariably  higher  in  this  country  than  in  France  ? 
Is  it  because  we  have  a  greater  demand  for  il,  or  because  of  the 
greater  cost  of  production  in  this  country  ? 

A  pound  weight  of  gold  is   at  present  worth   about  fifteen  Reason  why 
pounds  of  silver.     It  cannot,  however,    be   said   that   this  is  a  ^'"'''  '=  j™"^" 
consequence  of  the  demand  for  gold  being  greater  than  the  de-  than'siiver. 
mand  for  silver,  for  the  reverse  is  the  fact.     Neither  can  it  be 
said  to  be  a  consequence  of  an   absolute  scarcity  of  gold  ;  for, 
those  who  choose  to  pay  a  sufficient  price  for  it  m^y  obtain  it  in 
any  quantity  they  please.     The   cause  of  this  difference  in  the 
price  of  the  two  metals  consists  entirely  in  the  circumstance  of 
its  costing  about  fifteen  times  as  much  to  produce  a  pound  of 

*  Some  of  the  advocates  of  the  agi-icultural  uitevest  have  represented 
this  as  one  of  the  "  dangerous  dogmas'"  of  the  Scotch  Economists  !  But  it 
can  boast  of  a  much  more  remote  origin : — "  JS'enio  enivi  samcs,''^  says  Varro, 
"■debet  telle  impensam  ac  sump  turn  facere  in  cuUuram,  si  videt  non  posse  re- 
Jiciy—^De  Re  Rust  tea.  Lib;  \.  \  2.) 

"  No  man  in  his  senses  will  lay  out  labour  and  expense  in  cultivation,  if 
he  foresees  that  he  cannot  be  repaid." — (Varro  on  Agriculture.)—/?. 


114  POLITICAL    ECONOMY. 

Cost  of  Pro-  gold  as  to  produce  a  pound  of  silver.     That  this  is  reall}'^  the 
Sating^    case,  is  plain  from  the  admitted  fact  that  the  producers  of  gold 
Principle  of  (]o  not  gain  any  greater  prolit  than  the  producers  of  silver,  iron, 
lead,  or  any  other  metal.     They  have  no  monopoly  of  the  busi- 
ness.    Every  individual  who  pleases  may  send  capital  to  Brazil, 
and  become  a  producer  of  gold  ;  and  wherever  this  is  the  case, 
the  principle  of  competition  will  always  force  the  product  to  be 
sold  at  such  a  price  as  will  just  pay  the  expenses  of  its  produc- 
tion and  no  more.     Were  a  gold  mine  discovered  of  equal  pro- 
ductiveness with  the  silver  mines,  the  production  of  gold  would 
immediately  become  the  most  advantageous  of  all  businesses  ;  an 
immense  supply  of  that  metal  would,  in  consequence,  be  thrown 
on  the  market,   and  its  price  would,  in  a  very  short  period,  be 
reduced  to  the  same  level  as  silver. 
Reasons  why      As  a  further  illustration  of  this  principle  take  the  case  of  cot- 
/leciincd  in^^  tons.     No  One  Can  deny  that  the  demand  for  them  has  been  pro- 
priof.  digiously  augmented  within  the  last  fifty  or  sixty  years  ;  and  yet 

their  price,  instead  of  increasing,  as  it  ought  to  have  done,  had 
the  popular  theory  of  demand  and  supply  been  well  founded, 
has  been  constantly  and  rapidly  diminishing.*  If  it  is  said  that 
this  is  a  consequence  of  the  supply  of  cottons  having  augmented 
in  a  still  greater  ratio  than  the  demand,  we  answer  that  this  is 
not  enough  to  explain  the  f;ill  of  price.  The  supply  would  not 
and  could  not  possibly  have  been  brought  to  market,  had  not  the 
constant  diminution  of  prices,  which  has  been  going  on  since  the 
invention  of  spinning-jennies  in  1767,  been  balanced  by  an  equal 
diminution  of  the  cost  of  production.  It  is  to  this  principle — to 
the  vastly  increased  facility  of  production,  occasioned  by  the 
stupendous  inventions  and  discoveries  of  Hargreaves,  Watt,  Ark- 
%vright,  Crompton,  and  others,  that  the  lower  price  and  increased 
demand  for  cottons  is  exclusively  owing.  The  increased  facility 
of  production  has  brought  them  within  the  reach  of  all  classes 
of  the  people  ;  and  enabled  the  poorest  individuals  in  the  king- 
dom to  clothe  themselves  in  a  dress  which,  at  the  accession  of 
George  III.  was  fully  as  expensive  as  silk. 
Competition  ^^  J^^  bring  a  set  of  men  together  from  various  countries  who 
of  the  Pro-    are  ignorant  of  each  others  wants,  and  of  the  labour  and  ex- 

ducers  in  a  x  i  it_  i-i-  i  •    i  i 

Civilized  So- pense  necessary  to  produce  the  commodities  which  each  pos- 
<=|<='y  ^^.''' ^'"  sesses,  the  commodities  will  be  bought  and  sold  according  to  the 
PYicestoiiic  relative  wants  and  fancies  of  the    parties.       In  such  circum- 
du"ct\on.^'^'''  stances,  a  pound  of  gold  might  be  given  for  a  pound  of  iron,  and 
a  gallon  of  wine  for  a  gallon  of  small  beer.     As  soon,  however, 
as  a  commercial  intercourse  has  been  established,  and  as  the 
■wants  of  society  and  the  powers  of  production  come  to  be  well 
and  generally  known,  an  end  is  put  to  this  method  of  barter- 
ing.    Thousands  of  sellers,  then  enter  the  market.    But  when 
such  is  the  case,  it  is  no  longer  possible  to  sell  a  pound  of  gold 
for  a  pound  of  iron  ;  and  why  ?  because  the  producers  of  iron 
will  undersell  each  other  until  they  have,  by  their  competition, 
reduced  its  price  to  such  a  sum  as  will  just  suffice  to  pay  the 

*  This  is  not  candidly  stated.  No  theoiy  teaches  tliat  price  rises  with 
demand,  absolutely ;  it  is  relative  demand  as  compared  with  supply. 
Through  the  greater  powers  of  machinery  au  increased  supply  was  first 
thrown  into  the  market,  and  each  succeeding  decrease  of  price  has  been 
accompanied  by  increase  of  quantity. — E. 


rOLlTICAL    ECONOMV.  115 

expense  oi"  its  production.  This  is  in  every  civilized  society  Cost  of  Pro 
the  pivot  on  which  exchangeable  value  always  turns.  A  civili-  re^^uiaiing"' 
zed  man  misht  be  able  to  obtain  commodities  from  a  savage,  in  i'".""'ii'i;  "i" 

^  .         •  c?    '         IT  rice 

exchange  for  toys  or  trinkets,  which  it  cost  infinitely  less  to  pro- 
duce ;  but  if  he  tries  to  obtain  the  same  advantage  over  his  own 
countrymen,  a  very  short  experience  will  be  enough  to  satisfy 
him  that  they  are  quite  as  clear-sighted  and  attentive  to  their 
own  interests  as  he  is. 

Thus,  then,  it  appears,  that  no  variation  of  demand,  if  it  be 
unaccompanied  by  a  variation  in  the  cost  of  production,  can  have 
any  lasting  influence  on  price.*  If  the  cost  of  production  be 
diminished,  price  will  be  equally  diminished,  though  the  demand 
should  be  increased  to  any  conceivable  extent.  If  the  cost  of 
production  be  increased,  price  will  be  equally  increased,  though 
the  demand  should  sink  to  the  lowest  possible  limit. 

It  must  always  be  remembered,  that  this  reasoning  only  ap- I'lfluenee  of 
plies  to  the  case  of  those  commodities  on  which  competition  is  °'"'^'°  '**' 
allowed  to  operate  without  restraint,  and  whose  quantity  can  be 
indefinitely  increased  by  the  application  of  fresh  capital  and  in- 
dustry to  their  production.  When  a  particular  individual,  or 
class  of  individuals,  obtain  the  exclusive  privilege  of  manufac- 
turing certain  species  of  goods,  the  operation  of  the  principle 
of  competition  is  suspended  with  respect  to  them,  and  their  price 
must,  therefore,  entirely  depend  on  the  proportion  in  which  they 
are  brought  to  market  compared  with  the  demand.  If  mono- 
polists supplied  the  market  liberally,  or  kept  it  always  as  fully 
stocked  with  commodities  as  it  would  have  been  had  there  been 
no  monopoly,  the  commodities  produced  by  them  would  sell  at 
their  natural  price,  and  the  monopoly  would  have  no  further 
disadvantage  than  the  exclusion  of  the  public  from  an  employ- 
ment which  every  one  ought  to  have  the  right  of  carrying  on. 
In  point  of  fact,  however,  the  market  is  never  fully  supplied 
with  commodities  produced  under  a  monopoly.  Every  class  of 
producers  naturally  endeavour  to  obtain  the  highest  possible 
price  for  their  commodities  ;  and  if  they  are  protected  by  means 
of  a  monopoly,  against  the  risk  of  being  undersold  by  others, 
they  will  either  keep  the  market  understocked,  or  supply  it 

*  The  truth  of  this  assertion  depends  on  the  extent  given  to  the  term 
lasting,  and  at  any  rate  must,  as  we  have  seen,  be  limited  by  many  conside- 
rations. It  is  altogether  inapplicable  in  all  cases  of  monopoly,  or  in  those 
more  numerous  ones  which  approach  to  it,  even  in  a  state  of  freedom,  such 
as  peculiar  talent  or  skill,  which  constitute  as  it  were,  a  personal  monopoly 
of  the  products  which  result  from  them,  or  of  those  numberless  natural 
monopolies  in  which  the  bounty  of  nature  is  limited  and  cannot  by  the  art 
of  man  be  increased.  The  rule  of  our  author  is  strikingly  inaccurate  in 
its  application  to  the  price  of  all  raw  produce,  in  which  the  market  price 
seems  to  lose  all  reference  to  costs  of  production,  and  to  be  governed  simply 
by  the  comparative  demand  and  supply.  Those  who  reject  the  costs  of  pro- 
duction as  the  regulating  principle  of  exchangeable  value,  argue  that  they 
operate  only  in  subordination  to  the  dominant  principle  of  demand  and 
supply  ;  they  are  the  necessary  condition  of  the  article  or  commodity  be- 
ing brought  into  market,  but  when  once  there,  it  is  effective  demand  as 
compared  with  supply  which  determines  its  price.  For  these  views,  see 
Malthus,  ch,  2,  sect.  3.  Where  such  men,  however,  as  Ricardo  and  Mal- 
thus  differ,  truth  will  generally  be  found  in  a  middle  opinion,  and  the  dis- 
pute to  be  less  about  the  nature  of  things  than  the  meaning  of  words,  or 
the  light  in  which  things  are  to  be  regarded.  See  Ricaiclo,  ch.  1,  and  3ft- 
:?av.  Book  II.  ch.  1.  and  4. — E, 


116  POLITICAL    ECONOMY. 

Cost  of  Pro-  with  inferior  articles,  or  both.  In  such  circumstiances,  the  price 
reg"ia"ing''  of  the  commodity,  if  it  cannot  be  easily  smuggled  from  abroad, 
principle  of  or  clandestinely  produced  at  home,  will  be  elevated  to  the 
highest  point  to  which  the  competition  of  the  buyers  can  raise 
it,  and  may,  in  consequence,  be  sold  for  five,  ten,  or  twenty  times 
the  sum  for  which  it  would  be  offered  were  competition  permit- 
ted to  operate  in  its  production.  The  will  and  power  of  the 
purchasers  to  offer  a  high  price  forms  the  only  limit  to  the  rapa- 
city of  monopolists. 

Besides  the  commodities  produced  under  an  artificial  mono- 
poly, there  is  another  class  whose  quantity  cannot  be  increased 
by  the  operation  of  human  industry,  and  whose  price  is  not, 
therefore,  dependant  on  the  cost  of  their  production.  Ancient 
statues,  vases,  and  gems,  the  pictures  of  the  great  masters,  some 
species  of  wines  which  can  be  produced  in  limited  quantities 
only  from  soils  of  a  particular  quality  and  exposure,  and  a  few 
other  commodities,  come  under  this  description.  As  their  sup- 
ply cannot  be  increased,  their  price  must  vary  inversely  as  the 
demand,  and  is  totally  unaffected  by  any  other  circumstance. 
Average  But  with  these  exceptions,  which,  when  compared  to  the  great 

c'oincidinr^'  mass  of  Commodities,  are  extremely  few  and  unimportant,  wher- 
V  ill.  Cost  of  ever  industry  is  unrestricted  and  competition  allowed  to  operate, 
the  average  price  of  the  various  products  of  art  and  industry, 
always  coincides  with  the  cost  of  their  production.  When  a 
fall  takes  place  in  the  market  price  of  any  commodity,  we  can- 
not say  whether  that  fall  is  really  advantageous,  or  whether  a 
part  of  the  wealth  of  the  producers  be  not  gratuitously  trans- 
ferred to  the  consumers,  until  we  learn  whether  the  cost  of  pro- 
duction has  been  equally  diminished.  If  this  is  the  case,  the 
fall  of  price  will  not  have  been  disadvantageous  to  the  produ- 
cers, and  will  be  permanent ;  but  if  this  has  not  been  the  case 
— if  the  cost  of  production  continues  the  same,  the  fall  must 
have  been  injurious  to  the  producers,  and  prices  will,  in  conse- 
quence, speedily  attain  their  former  level.  It  is  the  same  with 
a  rise  of  prices.  No  rise  can  be  permanent  except  where  the 
cost  of  production  has  been  proportionably  increased.  If  that 
cost  has  remained  stationary,  or  has  not  increased  in  a  corres- 
})onding  ratio,  prices  will  decline  as  soon  as  the  ephemei'al 
causes  of  enhancement  have  disappeared. 

The  extreme  importance  of  having  correct  opinions  respect- 
ing the  regulating  principle  of  price,  and  the  discordant  and 
erroneous  opinions  that  are  still  so  exceedingly  prevalent  with 
legard  to  it,  will,  we  hope,  be  deemed  a  sufficient  apology  for 
the  length  of  the  previous  remarks,  and  for  the  insertion  of 
Opinion  of  the  following  paragraph  from  the  Histoirt  de  la  Monnaic  of 
the  Marquis  ^|^g  Marquis  Gamier,  in  which  the  doctrine  we  have  been  en- 
deavouring  to  establish  is  enforced  with  equal  ability  and  elo- 
quence : 

"  Mais  les  productcurs  tendentcontinullementareglerlaquan- 
tite  des  productions  sur  la  somme  des  demandes  ;  ils  ne  restevont 
pas  au-dessous  de  ce  point,  sans  etre  tenti's,  d'accroitre  la  masse 
de  leurs  produits  ;  et  ils  ne  peuvent  le  depasser  sans  s'exposer  it 
perdre.  Ces  deux  (juantitt^s,  celle  des  produits  et  celle  des  de- 
mandes, s'efforcent  done  a  se  mettre  en  equilibre  Tune  avec 
I'autre.      11  existe  done  un  point  de  repos  vers  lequel  elle? 


POLITICAL   ECONOMY.  117 

graviteiit  chacune  de  son  cote;  un  point  qui  est  leur  niveau,  Cost  of  Pro 
et  c'est  ce  point  qui  constitue  le  prix  naturel  de  la  chose  ve-  f^g^ul^fing" 
nale.  Quelle  est  la  limite  au-dela  de  laquelle  le  producteur  pf'.ncipioof 
ne  peut  porter  la  quantite  de  ses  produits  ?  C'est  le  prix  na- 
turel ;  car,  s'il  ne  peut  obtenir  ce  prix  pour  tout  son  produit,  il 
sera  en  perte.  Quelle  est  la  boi'ne  des  demandes  du  consom- 
tnateur  ?  C'est  le  prix  naturel ;  car  il  ne  veut  pas  donner  plus 
que  I'equivalent  de  ce  qu'il  re^oit.  Si,  par  une  decouverte,  ou 
par  un  perfectionnement  de  I'industrie,  le  producteur  est  mis  a 
meme  d'etablir  I'article  sur  lequel  il  s'exerce  amoins  de  temps 
et  de  depense,  alors  le  prix  naturel  baissera,  mais  aussi  la  som- 
me  des  demandes  accroitra  dans  une  proportion  pareille,  parce 
que  plus  de  consommateurs  seront  en  (5tat  de  payer  ce  prix 
naturel,  moins  eleve  que  I'ancien.  Le  prix  naturel  sera  toujours, 
pour  chaque  chose  vaiale,  la  limite  commune  au-dela  de  laquelle 
la  somme  des  demandes  de  cette  chose  et  la  quantite  de  sa  pro- 
duction ne  devront  plus  /aire  deprogres.  Quand  le  prix  courant 
est  le  prix  naturel,  le  producteur  et  le  consommateur  se  don- 
nent  reciproquement  I'equivalent  de  ce  qu'ils  re§oivent.  Quand 
le  prix  courant  s'ecarte  du  prix  naturel,  ou  c'est  la  consom- 
mation  quisouffre  au  profit  de  la  production,  ou  c'est  la  pro- 
duction qui  souffre  au  profit  de  la  consommation.  Get  etat  de 
soufirance  ne  peut  durer,  et  de  la  procedent  les  variations  du 
prix  courant.  Ces  variations,  que  Smith  a  expliquees  et  analy- 
sees  avec  une  si  parfaite  lucidite,  nesont  autre  chose  que  les  ef- 
forts pour  revenir  au  prix  naturel.  Tenter  d'expliquer  ces 
variations,  sans  reconnaitre  I'existence  d'un  prix  naturel,  ce 
serait  vouloir  expliquer  les  oscillations  du  pendule  sans  convenir 
de  sa  tendance  vers  un  centre  de  gravitation  ;  ce  serait  supposer 
un  effort  sans  but  et  sans  mobile  ;  ce  serait  admettre  le  mouve- 
ment  et  nier  le  repos  ;  enfin,  en  voyant  les  phenomenes  du 
cours  des  fluides  et  de  I'^quilibre  des  solides,  ce  serait  contester 
les  lois  du  niveau  et  de  la  pesanteur.  Si  les  choses  venales 
n'ont  point  de  prix  naturel,  alors  les  mom^emens  de  la  circulation 
seront  diriges  par  une  force  aveugle  et  inconnue  ;  les  prix 
moyens  ne  seront  plus  que  le  r(^sultat  de  chances  purement  for- 
luites  ;  il  n'y  aura  plus  d'equivalent  reel ;  les  valeurs  n'auront 
plus  de  mesure  naturelle  ;  I'economie  politique  ne  pourra  plus 
aspirer  a  etre  au  rang  des  sciences,  puisqu'elle  manquera  du 
caractere  essentiel  qui  les  constitue  telles,  et  que  les  faits  dont 
elle  traite  ne  seront  plus  fondes  sur  les  lois  immuables  de  la 
nature."* — (Tome  I.  Introduction,  p.  62.) 

"*■  "  Producers  constantly  seek  to  regulate  the  quantity  of  tlieir  products 
by  the  extent  of  the  demand.  They  cannot  remain  below  this  point  with- 
out being  tempted  to  increase  the  amount  of  their  products,  nor  can  they 
pass  it  without  being  exposed  to  loss.  These  two  quantities,  therefore,  ol 
demaiid  and  supply  are  necessarily  always  tending  to  an  equilibrium. 
There  is  a  certain  period  of  rest  towards  which  each  on  its  own  side  gra- 
vitates— a  point  which  brings  them  to  a  level,  and  which  constitutes  the 
natural  price  of  the  thing  sold.  For  what  is  the  limit  beyond  which  the 
producer  cannot  pass  in  the  quantity  of  his  products .''  It  is  their  natural 
price — for  he  is  a  loser  if  he  cannot  obtain  this  price  for  all.  What  too  is 
the  limit  of  the  demand  of  the  consumer  ?  It  is  the  natural  price,  for  he 
will  not  give  more  than  an  equivalent  for  that  which  he  receives.  If  by 
a  new  discovery  or  improvement,  the  producer  is  enabled  to  furnish  the 
article  on  which  he  labours  in  less  time  and  at  less  expense,  the  natural 
price  will  then  sink,  but  at  the  same  time  the  demand  will  increase  in  a 

15 


1  1  8  POLITICAL  ■  KCONOMY. 

Nature  and  Having  thus  shoM'n  that  it  is  the  cost  of  production  which  >s 
K^n^*^'"  the  sole  regulating  principle  of  price,  we  shall  now  proceed  to 
investigate  the  elements  which  enter  into  and  constitute  the  cost 
of  producing  commodities  in  an  advanced  state  of  society,  when 
a  rent  is  paid  for  land,  and  circulating  and  fixed  capital  employed 
to  facilitate  the  lahour  of  the  workman.  This  is,  of  all  others, 
the  most  important,  as  it  is  the  most  radical  inquiry  in  the  science 
of  the  distribution  of  wealth  ;  and  it  is  indeed  impossible,  with- 
out possessing  accurate  notions  on  this  subject,  to  advance  a 
single  step  without  falling  into  errors.  We  shall  begin  by  en- 
deavouring to  ascertain  whether  rent  enters  into  the  cost  of  pro- 
duction, or  not. 

Sect.  III. ~^J\'aiiirc,  Origin,  and  Progress  of  Rent — jYot  a  Cause 
but  a  Conseqiience  of  the  High  Value  of  Raw  Produce — Does 
not  enter  into  Price — Distinction  between  Agriculture  and 
Manufactures. 

Dr.  Smith  was  of  opinion,  that,  after  land  had  become  pro- 
perty, and  rent  began  to  be  paid,  such  rent  made  an  equivalent 
addition  to  the  exchangeable  value  of  the  produce  of  the  soil. 
(^Wealth  of  JVations,  I.  p.  75.)  This  opinion  was  first  called  in 
question  in  two  pamphlets  of  extraordinary  merit,  published 
nearly  at  the  same  time,  by  Mr.  Malthus,*  and  a  Fellow  of  Uni- 
versity College,  Oxford. t  These  writers  endeavoured  to  show- 
that  rent  was  not,  as  had  been  generally  supposed,  a  consequence 
of  land  being  appropriated  and  of  limited  extent,  but  of  the 
superior  productiveness  of  one  species  of  land  over  another  ; 

like  proportion,  because  more  consumers  will  be  able  to  purchase  at  this 
reduced  cost.  JVatural  price,  therefore,  in  every  case,  constitutes  the  limit 
fteyond  lohich,  in  all  vendible  commodities,  demand  and  supply  cannot  ad- 
vayice.  When  the  market  price  conours  with  the  natural,  the  producer  and 
consumer  give  in  turn  an  equivalent  for  that  which  they  receive.  When- 
ever the  market  price  deviates  from  the  natuial,  either  the  consumer  suf- 
fers for  the  profit  of  the  producer,  or  the  producer  suffers  for  that  of  the 
consumer.  This  state  of  loss  cannot  be  permanent ;  and  hence  proceed 
the  variations  of  market  price.  These  variations  which  Smith  has  explain- 
ed and  analyzed  with  such  perfect  clearness,  are  nothing  else  than  efforts 
to  return  to  the  natural  price.  To  attempt  the  explanation  of  these  vari- 
ations without  referringto  a  natural  price,  would  be  to  explain  the  oscilla- 
tions of  a  pendulum  without  acknowledging  its  tendency  to  the  centre  of 
gravity;  it  would  be  to  suppose' an  effort  without  aim,  to  admit  motion 
and  deny  rest ;  it  would  be  equivalent  in  fine,  after  witnessing  the  phe- 
nomena of  the  course  of  fluids  and  the  weight  of  solids,  to  a  denial  of  the 
laws  which  bring  the  one  to  a  level  and  the  other  to  an  equilibrium.  If  ven- 
dible commodities  have  no  natural  price,  then  the  movements  of  its  circu- 
lation will  be  directed  by  a  blind  and  unknown  force,  and  average  prices 
will  be  the  result  of  causes  altogether  fortuitous ;  there  will  be  no  such 
thing  as  a  real  equivalent ;  value  will  have  no  natural  measure  ;  Political 
Economy  can  no  longer  aspire  to  the  rank  of  science,  since  it  will  want 
that  which  constitutes  it  such,  viz. — that  the  facts  of  which  it  treats  are 
founded  upon  the  immutable  laws  of  nature." — E. 

*  An  Inquiry  into  the  JValure  and  Progress  of  Rent,  by  the  Rev.  T.  R. 
Malthus,  1815. 

t  An  Essay  on  the  Application  of  Capital  to  Land,  by  a  Fellow  of  Uni- 
versity College,  Oxford,  1815. 

See  note  p.  43,  where  mention  is  made  of  this  essay ;  though  its  prio- 
rity to  tiie  Inquiry  of  Malthus  is  incorrectly  stated.  Malthus'  Inquiry 
into  the  nature  of  Rent  liaving  been  published  in  1815,  his  Principles 
"f  Political  Economv  not  until  1819.—^:. 


POLITICAL  ECONOMY.  1  1  9 

jmd  that  the  annihilation  of  rents  would  not,  provided  tHe  same  Nature  and 
extent  of  land  was  cultivated,  enable  its  produce  to  be  sold  at  a  r^Ui*"  "' 
lower  price.  Mr.  Ricardo  has  illustrated  and  enforced  this 
doctrine  witii  his  usual  ability — has  stripped  it  of  the  errors  by 
which  it  had  been  encumbered,  and  has  shown  its  vast  impor- 
tance to  a  right  understanding  of  the  laws  which  regulate  tlie 
rise  and  fall  of  profits.  But  the  subject  is  still  far  from  being 
exhausted  ;  and  we  hope  to  be  able  to  treat  it  in  a  somewhat 
different  manner  from  what  it  has  been  treated  by  either  of  these 
gentlemen,  and  to  obviate  some  rather  specious  objections  which 
have  not  come  under  their  notice.* 

Rent  is  properly  -'  that  portion  of  the  produce  of  the  earth  Definition 
which  is  paid  by  the  farmer  to  the  landlord  for  the  use  of  the  °'  '''^^ 
natural  and  inherent  powers  of  the  soil."  If  buildings  have 
been  erected  on  a  farm,  or  if  it  has  been  inclosed,  drained,  or 
in  any  way  improved,  by  an  expenditure  of  capital  and  labour, 
the  sum  which  a  farmer  will  pay  to  the  landlord  for  its  use  will 
be  composed,  not  only  of  what  is  properly  rent,  but  also  of  a 
remuneration  for  the  use  of  the  capital  which  has  been  laid  out 
in  its  improvement.  In  common  language,  these  two  sums  are 
always  confounded  together,  under  the  name  of  rent  ;  but  in  an 
inquiry  of  this  nature,  it  is  necessary  to  consider  them  as  per- 
fectly distinct.  The  laws  by  which  rent  and  profits  are  regu- 
lated being  totally  different,  those  which  govern  the  one  cannot 
be  ascertained  if  it  be  not  considered  separately  from  the  other. 

On  the  first  settling  of  any  country  abounding  in  large  tracts  NoUentpaid 
of  unappropriated  land,  no  rent  is  ever  paid  ;  and  for  this  plain  ""ttUn-^o? 
and  obvious  reason,  that  no  person  will  pay  a  rent  for  what  may  any  Country. 
be  procured  in  unlimited  quantities  for  nothing.!     Thus  in  New 
Holland,  where  there  is  an  ample  supply  of  fertile  xmdunappro- 
priated  land,  it  is  certain  that  until  the  best  lands  are   all  culti- 
vated no   such  thing  as   rent  will  ever  be  heard  of     Suppose, 

*  Regarding  as  the  Editor  does  this  new  analysis  of  Rent  as  one  of  the 
peculiar  merits  of  the  modern  school,  and  the  present  as  one  of  the  ablest 
exhibitions  of  it,  ho  is  not  inclined  to  trouble  the  reader  with  the  arguments 
of  its  opponents  ;  they  may  be  found  in  their  original  form  in  the  Wealth 
of  Nations,  Book  I.  ch.  11.  Part  !<  2,  and  3.  hi  Say,  Book  II.  eh.  9  ;  and 
in  a  note  of  the  translation  of  Say,  Vol.  II.  p.  118,  Boston,  1821 ;  and  in 
the  Quarterly  Review,  No.  GO.  The  arguments  of  its  maintainers  may  be 
seen  in  the  essays  above  referred  to,  in  Malthus'  Political  Economy,  ch.  3, 
and  Ricsfrdb,  ch.  2,  or  Mills'  Elements,  ch.  2,  sect.  1  ;  Edinburgh  Review 
of  Ricardo. — E. 

t  Of  the  truth  of  this  position  the  interior  of  our  country  affords  abun- 
dant illustration.  Distance  from  a  market,  and  the  previous  labour  of 
clearing  render  a  land-owner  poor  in  the  midst  of  the  materials  of  wealth, 
and  cause  the  full  returns  of  land  to  be  no  more  than  a  fair  equivalent  for 
the  labour  necessary  to  its  cultivation.  It  is  indeed  true  that  the  apprecia-  ■ 
tion  of  the  land  arising  from  this  labour  is  to  the  owner  an  equivalent  for 
rent,  but  it  is  equally  true  that  this  being  an  incidental  result  and  not  paid 
for  by  the  tenant,  does  not  enter  into  the  price  of  the  grain  so  raised,  since 
it  will  continue  to  be  raised  at  a  price  which  repays  simply  the  labour 
employed  in  its  production.  Hence  in  our  country  the  anomalous  class  of 
indigent  rich  men — capitalists  who  with  funds  locked  up  in  land,  which  the 
needs  of  society  have  not  yet  brought  into  cultivation,  starve  in  the  midst 
of  the  bounties  of  nature.  By  such  at  least  the  discriminating  judgment 
of  Madam  de  Sevigne  will  not  be  questioned  when  she  writes  from  the 
country — "  I  wish  my  son  could  come  here  and  convince  himself  of  the  fal- 
lacy of  fancying  ourselves  possessed  of  wealth  when  one  is  only  possessed 
of  lands."     De  Sevigne,  let.  224.     Say,  Book  I.  ch.  9. 


120  POLITICAL    ECONOMY. 

I 

Nature  and  howcver,  that  tillage  has  been  carried  to  this  point,  and  that  the 
Causes  of     jn(.reasing  demand  can,  in  the  actual  state  of  the  science  of 
agriculture,  be  no  longer  supplied  by  the  best  lands,  it  is  plain 
that  either  the  increase  of  population  must  cease,  or  the  inha- 
bitants must  consent  to  pay  such  an   additional  price  for  raw 
produce  as  will  enable  the  second  quality  of  land  to  be  culti- 
vated.    No   advance  short  of  this  will  procure  them   another 
bushel  of  corn  ;    and  competition  will  not,  as  we  shall  imme- 
diately show,  allow  them  to  pay  more  for  it.     They  have,  there- 
fore, but  one  alternative.     If  they  choose  to  pay  a  price  suffi- 
cient to  cover  the   expense  of  cultivating  land  of  the  second 
quality,  they  will  obtain  additional  supplies  ;  if  they  do  not,  they 
Origin  of     must  Want  them.     Suppose,  now,  that  the  consumers  offer  such 
^"''  a  price  as  wdl  pay  the  expense  of  producing  corn  on  soils  which, 

in  return  for  the  same  expenditure  as  would  have  produced  100 
quarters  on  lands  of  the  Jirst  quality,  willonly  yield  90quarters  ;  it 
is  plain  it  will  then  be  just  the  same  thing  to  a  farmer  whether  he 
pays  a  rent  of  ten  quarters  for  the  first  quality  of  land,  or  farms 
the  second  quality,  which  is  unappropriated  and  open  to  him, 
Progress  of  without  paying  any  rent.  If  the  population  went  on  increasing, 
Rent.  lands  which  would  yield  only  80,  70,  60,  50,  &.c.  quarters  in  re- 

turnfor  the  same  expenditure  that  had  obtained  100  quarters  fromthe 
best  lands,  might  be  successively  brought  under  cultivation.  And 
when  recourse  had  been  had  to  these  inferior  lands,  the  rent  of 
the  land  of  the  higher  qualities  would  plainly  be  equal  to  the  dif- 
ference, or  the  value  of  the  difference,  between  their  produce  and 
the  produce  of  the  worst  quality  under  cultivation.  Suppose,  for 
example,  that  the  worst  quality  under  cultivation  yields  60  quar- 
ters, then  the  rent  of  the  first  quality  will  be  40  quarters,  or 
100 — 60  ;  the  rent  of  the  second  quality  would,  in  like  manner, 
be  equal  to  the  diiference  between  90  and  60,  or  30  quarters  ; 
the  rent  of  the  third  quality  would  be  equal  to  80 — 60,  or  20 
quarters,  and  so  on.  The  produce  raised  on  the  land  last  culti- 
vated, or  with  the  capital  last  applied  to  the  soil,  would  always 
be  sold  at  its  necessary  price,  or  at  that  price  which  is  just  suffi- 
cient to  yield  the  cultivators  the  common  and  average  rate  of 
profit,  or,  which  is  the  same  thing,  to  cover  the  cost  of  its  pro- 
duction. If  the  price  were  above  this  level,  then  agriculture 
would  be  the  best  of  all  businesses,  and  tillage  would  be  imme- 
diately extended  ;  if,  on  the  other  hand,  the  price  f^l\  below 
this  level,  capital  would  be  withdrawn  from  the  soil,  and  the 
poorer  lands  thrown  out  of  cultivation.  In  such  circumstances, 
it  is  undeniably  certain  that  no  rent  could  enter  into  the  price  of 
that  portion  of  produce  raised  with  the  capital  last  applied  to 
the  soil.  Its  price  is  exclusively  made  up  of  wages  and  profits. 
The  proprietors  of  the  superior  lands  obtain  rent ;  but  this  is 
the  necessary  result  of  their  greater  fertility.  The  demand  can- 
not be  supplied  without  cultivating  inferior  soils  ;  and  to  enable 
them  to  be  cultivated,  their  produce  must  sell  for  such  a  price  as 
will  afford  the  ordinary  rate  of  profit  to  their  cultivators.  This 
price  will,  however,  yield  a  surplus  over  and  above  the  ordinary 
rate  of  profit  to  the  cultivators  of  the  more  fertile  lands,  and 
this  surplus  is  rent. 

An  increase  of  rent  is  not,  therefore,  as  is  very  generally 
svipposed,  occasioned  by  improvements  in  agriculture,  or  by  an 


POLITICAL   ECOXOMY.  121 

increase  in  the  fertility  of  the  soil.  It  results  entirely  from  the  Nature  and 
necessity  of  resorting,  as  population  increases,  to  soils  of  a  de-  ReHr^"^ 
creasing  degree  of  fertility.  Rent  varies  in  an  inverse  propor- 
tion to  the  amount  of  produce  obtained  by  means  of  the  capital 
and  labour  employed  in  cultivation  ; — that  is,  it  increases  when 
the  profits  of  agricultural  labour  diininish,  and  di7ninish€s  when 
they  increase.  Protits  are  at  their  maximum  in  countries  like 
New  Holland,  Indiana,  and  Illinois,*  and  generally  in  all  situations 
in  which  no  rent  is  paid,  and  the  best  lands  only  cultivated  ;  but 
it  cannot  be  said  that  rents  have  attained  their  maximum  so  long 
as  capital  yields  any  surplus  in  the  shape  of  profit. 

A  quarter  of  wheat  may  be  raised  in  the  Vale  of  Gloucester, 
or  in  the  Carse  of  Gowrie,  at  perhaps  a  fourth  or  a  fifth  part  of 
the  expense  necessary  to  raise  it  on  the  worst  soils  in  cultivation. 
There  cannot,  however,  be  at  the  same  time  two  or  more  prices 
for  the  same  article  in  the  same  market.  And  it  is  plain,  that  if 
the  average  market  price  of  wheat  be  not  such  as  will  indemnify 
the  producers  of  that  which  is  raised  on  the  n^orst  soils,  they 
will  cease  bringing  it  to  market,  and  the  required  supplies  will 
no  longer  be  obtained  ;  and  it  is  equally  plain,  that  if  the  market 
price  of  wheat  exceeds  this  sum,  fresh  capital  will  be  applied 
to  its  production,  and  competition  will  soon  sink  prices  to  their 
natural  level — that  is,  to  such  a  sum  as  will  just  afford  the  com- 
mon and  ordinary  rate  of  profit  to  the  raisers  of  that  portion  of 
the  required  supply  of  corn  which  is  produced  in  the  most  unfa- 
vourable circumstances,  and  with  the  greatest  expense.  It  is 
by  the  cost  of  producing  this  portion  that  the  average  price 
of  all  the  rest  must  always  be  regulated.  And,  therefore,  it  is 
plainly  all  one  to  the  consumers  whether,  in  an  advanced  stage 
of  society,  the  excess  of  return  over  the  cost  of  production  on 
lands  of  the  tirst  quality  belongs  to  a  non-resident  landlord,  or  an 
occupier.  It  must  belong  to  the  one  or  the  other.  Corn  is 
not  high  because  a  rent  is  paid,  but  a  rent  is  paid  because  corn 
is  high — because  the  demand-  is  such  that  it  cannot  be  supplied 
without  cultivating  soils  of  a  diminished  degree  of  fertility,  as 

*  Our  nearer  acquaintance  with  the  sections  of  country  here  specified, 
enables  us  to  perceive  that  some  error  must  lurk  in  the  reasoning  which  se- 
lects them  as  instances  of  peculiarly  high  profits.  The  simple  fact  of  no 
rents  being  paid,  or  what  is  equivalent,  only  the  first  quality  of  land  culti- 
vated is  not  a  sullicient  criterion ;  that  may  arise  from  two  causes,  from 
eitlier  the  want  of  a  market  for  produce,  or  a  present  surplus  of  fertile 
land.  It  is  from  the  latter  alone  that  high  profits  and  great  prosperity  flow. 
If  the  non-existence  of  rent  arising  from  the  former  cause  were  sufficient, 
then  the  closing  of  our  roads  and  great  canal  would  bring  our  western  coun- 
try to  a  more  flourishing  state  than  it  is  at  present,  for  it  would  infallibly 
greatly  reduce,  if  not  altogether  abolish  rents,  and  confine  its  inhabitant? 
to  the  cultiA'ation  of  the  first  quality  of  soil. 

It  would  also  have  been  more  correct  in  our  author  to  have  made  tlie 
reference  general  to  the  United  States,  the  sea  ports  of  which  participate 
equally  with  the  new  country  in  profits  arising  from  an  abundance  of  fer- 
tile soil.  It  is  besides  contrary  to  the  fundamental  proposition  of  the  ave- 
rage profits  of  capital  in  a  country,  to  institute  a  distinction  between  its  rate 
in  different  parts  of  it.  The  truth  is,  the  rate  of  profit  is  no  higher  in 
Indiana  thcui  in .  New-York,  except  in  so  far  as  a  premium  is  paid  for  the 
risk  of  the  employment  of  capital,  or  as  it  is  united  with  those  higher  wages 
for  personal  services  which  must  bribe  a  man  to  that  sacrifice  of  comfort  and 
enjoyment  necessarily  involved  in  a  removal  to  a  new  countr}'. — F. 


122  POLITICAL    ECONOMY. 

Nature  and  Compared  with  the  best.*  Suppose  there  is  an  eifectual  demand 
iientf^  °^  for  10  millions  of  quarters,  and  that  it  is  necessary  to  raise  one 
million  of  these  quarters  on  lands  which  yield  nothing  but  the 
common  and  average  rate  of  profit  to  their  cultivators  ;  it  is 
clear  that  the  relinquishing  of  the  rents  payable  on  the  superior 
lands  would  be  no  boon  whatever  to  the  cultivators  of  the  infe- 
rior lands.  It  would  not  lessen  their  expenses  ;  that  is,  it  would 
not  lessen  the  quantum  of  capital  and  labour  necessary  to  pro- 
duce that  portion  of  the  required  supply  which  is  raised  in  the 
most  unfavourable  circumstances  ;  and,  if.it  did  not  reduce  this 
expense,  it  is  utterly  impossible,  supposing  the  demand  not  to 
decline,  that  it  could  lower  prices.  Mr.  Malthus  is,  therefore, 
right  in  saying,  that  although  landlords  were  to  give  up  the  whole 
of  their  rents,  their  doing  so  would  have  no  influence  on  the 
price  of  corn.  Such  an  act  would  only  turn  farmers  into  gen- 
tlemen, and  gentlemen  into  beggars.  The  case  is,  however, 
distinctly  and  completely  different  when  the  cost  of  production 
varies.  If  it  is  diminished,  the  competition  of  the  producers 
will  infallibly  sink  prices  in  an  equal  proportion  :  If  it  is  in- 
creased, no  supplies  will  be  brought  to  market,  unless  the  price 
be  raised  to  a  corresponding  level.  In  no  case,  therefore,, 
whether  the  demand  be  great  or  small — whether  for  one  or  one 
million  of  quarters,  can  the  price  of  raw  produce  ever  perma- 
nently exceed  or  fall  below  the  sum  necessary  to  pay  the  cost  of 
producing  that  portion  of  the  supply  that  is  raised  on  the  worst 
land,  or  with  the  last  capital  laid  out  on  the  soil. 
Objectionsto  Two  objections  have  been  made  to  this  theory.  In  the  Jirst 
*"^  '  place,  it  has  been  said  that;  though  it  might  hold  good  in  a  coun- 
try like  New  Holland,  where  land  is  not  appropriated,  still  it  is 
true  that  all  the  lands  in  every  civilized  and  appropriated  coun- 
try like  England,  always  yield  some  small  rent  to  the  proprietor  ; 
and  that,  therefore,  it  cannot  be  said  that  the  price  of  produce 
is,  in  such  countries,  determined  by  the  cost  of  raising  it  on  that 
quality  of  land  which  pays  no  rent.' 

Mr.  Mill  has  justly  observed  of  this  objection,  that  even  if  it 
were  well  founded,  it  could  not  practically  affect  any  of  the  con- 
clusions we  have  endeavoured  to  establish.     There  are  in  Eng- 
land and  Scotland  thousands  of  acres  of  land  which  do  not  let 
for  L.  20  ;  but  to   cultivate  them   would  require  an   outlay  of 
many  thousands  ;  and  the  rent  would  consequently  bear  so  small 
a  proportion  to  the  expenses  of  production,  as  to  become  alto- 
gether evanescent  and  inappreciable.     (^Elements  of  Political 
Economy,  Y^.  19,  1st  edit.) 
Land  in  eve-      There  can  be  no  doubt,  however,  that  there  is  in  this,  and 
CountTv^'^*  most  other  extensive  countries,  a  great  deal  of  land  which  yields 
which  yields  no  rent  whatever.    In  the  United  States  and  Russia  such  is  unques- 
no    ent.       tionably  the  case  ;  and  yet  no  one  presumes  to  say  that  the  laws 
which  regulate  I'ent  in  the  United  States  and  Russia  are  different 
from   those  which  regulate   it  in   England   and   France.     The 
poorest  lands  are  always  let  in  immense  tracts.     If  it  were  at- 

*  That  this  explanation  of  the  origin  of  rent  is  satisfactory  and  conclu- 
sive, may  be  drawn  from  the  silence  of  those  writers  who  maintain  the 
sentiments  of  Adam  Smith  in  opposition  to  what  they  term  the  novel- 
ties of  the  school  of  Ricardo.  ,See  Quarterly  Review,  Vol.  XXX.  p. 
307.— T?:.  .  • 


.POLITICAL  ECONOMV.  123 

tempted  to  let  particular  portions  of  these  tracts  separately,  they  Nature  and 
would  bring  no  rent  whatever  ;  but  they  appear  to  yield  rent,  Rent"  ° 
because  rent  is  paid  not  for  them,  but  for  the  more  fertile  spots       ' — 
intermixed  with  them.     But  although  it  were  really  true  that  Ken7on'a°[ 
every  rood  of  land  in  Britain  paid  a  high  rent,  it  would  still  be  soiisnotin 
true  that  such  rent  did  not,  and  could  not,  enter  into  the  price  of  with'tiio"' 
raw  produce.     The  rent  of  a  country  consists  of  the  aijference,  'V'j'"!'''*' 
or  the  value  of  the  difference,  bet-ween  the  produce  obtained  from  <i<lt-s  not  en- 
the  capital  first  applied  to  the  land,  and  that  -which  is  last  applied  p,'ic"'° 
to  it.     It  would,  as  we  have  already  shown,  be  exactly  the  same 
thing  to  the  cultivator,  whether  he  paid  a  rent  of  ten  quarters 
to  a  landlord  fo*  land  yielding,  with  a  certain  outlay,  100  quar- 
ters of  corn,  or  employed  the  same  capital  in  cultivating  inferior 
land  yielding  only  90  quarters,  for  which  he  paid  no  rent.     If  it 
were  possible   always  to  obtain  100  quarters  for  every  equal 
additional  capital  applied  to  the  superior  soils,  no  person,  it  is 
obvious,  would  ever  resort  to  those  of  inferior  fertility.     But 
the  fact,  that,  in  the   progress  of  society,  new  and  le«s  fertile 
land  is  always  brought  into  cultivation,  demonstrates  that  addi- 
tional capital  and  labour  cannot  be  indefinitely  applied  with  the 
same  advantage  to  the  old  land.     The  state  of  society  in  any 
particular  country  may  be  such — the  demand  for  agricultural 
produce  may  be  so  great,  that  every  quality  of  land  actually 
yields  rent ;  but  it  is  the  same  thing  if  there  be  any  capital  em- 
ployed on  land  which  yields   only  the  return  of  stock  with  its 
ordinary  profits,  whether  that  capital  be  employed  on  old  or 
new  land.     That  there  is  a  very  large  amount  of  capital  em- 
ployed in  such  a  manner  in  this   and  every  other  country,  is 
abundantly  certain.     A  farmer  who   rents  a  farm,  besides  em- 
ploying on  it  such  a  capital  as  will,  at  the  existing  prices  of  raw 
produce,  enable  him  to  pay  his  rent,  to  obtain  the  average  rate 
of  profit,*  apd  to  replace  his  stock  previously  to  the  expiration 

*  This  novel  but  sound  analysis  furnishes  us  with  the  solution  of  a  phe- 
nomenon often  noticed  but  not  always  understood,  viz.,  the  want  in  our 
country  of  that  neat  and  cleanly  husbandry  which  adds  such  beauty  to  the 
farms  of  England  or  of  Flanders.  Few  of  our  country,  gentlemen  visit 
Europe  without  returning  with  the  resolution  of  rivalling  its  farmers  in 
that  particular,  and  perhaps  with  the  instruments  and  machines  by  which 
it  is  to  be  obtained.  A  few  years'  experience,  however,  throws  them  back 
by  a  kind  of  necessity  into  their  former  habits ;  a  falling  off  which  they 
attribute  either  to  their  own  indolence  or  to  the  incapacity  of  those  whom 
they  employ.  This  ana]5'sis  of  our  author^s  shows  it  to  be  the  result  of 
a  more  powerful  agent,  viz.,  self  interest,  which  keeps  them  down  to  that 
amount  of  capital  expended  upon  land  which  is  attended  with  tlie  greatest 
returns.  The  expenditure  from  which  this  perfect  neatness  of  cultivation 
results,  is  the  last  capital  laid  out  on  superior  lands,  and  therefore  only 
equivalent  in  its  returns  to  that  which  is  derived  from  the  poorest  soils  in 
cultivation  ;  hence  the  profit  of  our  farmers  would  be  prematurely  dimi- 
nished by  attempting  its  attainment.  It  is  a  thing  which  grows  with  the  ' 
price  of  land,  and  is  always  most  evident  when  rent  is  highest,  it  arises  not 
so  much  from  taste  or  skill  as  from  the  necessities  of  a  country,  and  shows 
that  it  has  fallen  from  that  high  rate  of  profits  which  is  the  mark  and  the 
blessing  of  a  new  people. 

But  lest  these  remarks  be  misunderstood,  it  is  proper  to  observe  that  the 
perfection  of  English  farming  arises  from  moral  as  well  as  physical  causes. 
Though  the  drill,  the  scarifier,  and  threshing  machine  of  England  are  unsuit- 
ed  to  our  western  wilderness,  and  will  disappoint  those  who  attempt  their 
introduction,  yet  the  order  and  regularity,  and  economy  of  time  and  mate- 
vials  which  are  equally  operating  causes  of  superiority  upon  an  English  fajm. 


124  POLITICAL    ECONOMY.. 

Naiuroand  of  his  Icase,  vviU  also  employ  an  additional  capital,  if  it  will  only 
Causes  of  jepi^^^g  jtsglf,  and  afford  the  ordinary  rate  of  profit.  Whether 
he  sliall  employ  this  additional  capital  or  not,  depends  entirely 
on  the  circumstance  of  the  price  of  raw  produce  being  such  as 
will  repay  his  expenses  and  profits  ;  for  he  knows  he  will  have 
no  additional  rent  to  pay.  Even  at  the  expiration  of  his  lease, 
his  rent  will  not  be  raised  ;  for,  if  his  landlord  should  require 
rent,  because  an  additional  capital  had  been  employed,  he  would 
withdraw  it  ;  since,  by  employing  it  in  agriculture,  he  got  only 
the  same  profits  he  might  have  got  by  employing  it  in  any  other 
department  of  industry.  If  the  capital  last  applied  to  the  soil 
yields  more  than  the  common  and  average  rate  of  profit,  fresh 
capital  will  be  invested  in  agriculture,  and  competition  will  sink 
prices  to  such  a  level  as  will  just  enable  them  to  yield  this  rate, 
and  no  more  ;  if  the  capital  last  applied  to  the  soil  yields  lesa 
than  this  common  and  average  rate  of  profit,  it  will  be  with- 
drawn, until,  by  the  rise  of  price,  the  last  remaining  capital 
yields  this  common  rate.  In  every  case,  therefore,  whether  the 
last  quality  of  land  taken  into  cultivation  yields  r6nt  or  not,  the 
last  capital  applied  to  the  soil  yields  only  the  common  and  average 
rate  of  profit ;  and,  consequently,  the  price  of  the  produce 
which  it  yields,  and  which  regulates  the  price  of  all  the  rest,  is 
totally  unaffected  by  rent. 
•Does  not  It  has,  in  the  second  place,  been  objected  to  this  account  of  the 

LaTdTr^s^*  nature  and  causes  of  rent,  that  it  takes  for  granted,  that,  in  all 
will  allow  extensive  countries,  landlords  permit  the  farmers  of  the  worst 
occupytheir  lands  to  occupy  them  without  paying  any  rent.  But,  it  is  easy 
lands  with-    t^Q  sJiow  that  this  is  a  mistake.     The  price  of  raw  produce  is 

out  paying  .  •         i  i  •   ■  ,^   r- 

Rent.  not  kept  down  to  its  necessary  price  by  the  competition  of  far- 

mers, but  by  that  of  the  landlords  themselves.  Though  there 
must  necessarily  be  a  very  wide  difference,  in  any  country  of 
considerable  extent,  between  the  best  and  worst  ^oils,  still  the 
gradation  from  the  one  extreme  to  the  other  is  gradual,  and  al- 
most imperceptible.  The  best  differ  but  little  from  those  which 
are  immediately  inferior  to  them,  and  the  worst  from  those- im- 
mediately abo.ve  them.  And  hence  it  is  just  as  impossible  to 
point  out  the  precise  point  where  the  first  quality  ends  and  the 
second  begins,  or  where  the  second  ends  and  the  third  begins,  as 
it  is  to  point  out  the  precise  point  where  the  contiguous  colours 
of  the  rainbow  differ.  Now,  suppose  that  the  numbers  1,  2,  3, 
4,  5,  6,  7,  &c.  designate  the  ditlerent  qualities  of  soil  in  an  ex- 
tensive country,  and  suppose  that  the  effectual  demand  for  raw- 
produce  is  such  as  will  just  aftord  the  common  and  average  rate 
of  profit  to  those  who  cultivate  land  of  the  fifth  degree  of  ferti- 
lity, or  that  represented  by  No.  5  ;  when  such  is  the  case,  there 
can  be  no  doubt  that  No.  5  will  be  cultivated  ;  for,  besides  the 
peculiar  attractions  which  agriculture  possesses,  it  would  be  quite 
as  advantageous  to  cultivate  it  as  to  engage  in  any  other  business. 
It  would  not,  however,  be  more  advantageous  ;  for  its  produce 
w  ould  yield  no  surplus  in  the  shape  of  rent.     But  suppose  that 

are  also  equally  suited  to  all  counti'ies,  nations,  and  stages  of  society,  since 
they  are  obtained  witliout  capital  and  exercised  without  cost.     These  it  is 
.that  diffuse  over  a  country  an  air  of  neatness  and  comfort  which  refreshes 
not  only  the  eye  but  the  heart  of  a  traveller,  since  it  tells  him  of  an  indus-. 
trions,  a  moraJ,  and  a  thriving^  people. — E. 


POLITICAL  ECONOMY.  125 

a  combination  took  place  among  the  proprietors  of  Nos.  1 ,  2,  Natnre  and 
3,  4,  and  5,  to  withhold  a  portion  of  their  produce  from  mar-  r^**'  "'^ 
ket ;  and  that  in  consequence  of  this,  or  any  other  cause,  the 
price  of  corn  is  raised  ever  so  little  above  the  expense  of  its 
production  on  No.  5  ;  in  that  case,  it  is  obvious  that  soils  of  the 
very  next  degree  of  fertility,  or  that  that  portion  of  No.  6,  which, 
in  point  of  productive  power,  differs  extremely  little  from  No. 
5,  would  be  instantly  brought  under  cultivation  ;  and  the  increas- 
ed supply  would  infallibly  sink  prices  to  the  level  that  would  just 
afford  the  average  rate  of  profit,  and  no  more,  to  the  cultivators 
of  No.  5,  or  of  the  poorest  soils  which  the  supply  of  the  effect- 
ual demand  renders  it  necessary  to  cultivate.  It  is  quite  the 
same  thing,  therefore,  in  so  lar  as  price  is  concerned, whether  a 
country  is  appropriated  or  not.  When  it  is  appropriated,  prices 
are  kept  down  to  their  lowest  limit  by  the  competition  of  the 
landlords.  And  it  is  by  the  selfsame  principle, — the  cost  ofpro- 
ducing  that  portion  of  the  necessary  supply  raised  in  the  most  un- 
favourable circumstances, — that  the  price  of  raw  produce  is  de- 
termined in  England  and  France  as  it  is  determined  in  New  Hol- 
land and  Illinois. 

But  then  it  is  said,  that  this  reasoning  involves   a  contradic-  Does  not  ac- 
tion,— that  it  accounts  both  for  a  rise  and  a  fall  of  price  in  the  fo"a  R^se** 
same  way,  or  by  an  extension  of  cultivation!     In  point  of  fact,  and  Fail  of 
however,  it  does  no  such  thing.*     The  market  price  of  corn  samoway-^ 
will  always  be  low  where  it  is  cheaply  produced,  as  in  Poland  ; 
and  it  will  occasionally  be  low  where  it  costs  a  great  deal  to  pro- 
duce it,  when  a  redundant  supply  is  brought  to  market,  as  is  the 
case  in  England  at  this  moment.     Suppose,  as  before,  that  the 
effectual  demand  for  corn  in  Great  Britain  is  at  present  such  as 
will  just  enable  lands  of  the  ffth  degree  of  fertility  to  be  cul- 
tivated ;  but  that,  owing  to  variable  harvests,  to  injudicious  en- 

*  Our  author's  unwillingness  to  acknowledge  the  influence  of  demantl 
and  supply  upon  price,  deprives  him  here  of  the  simple  and  true  solution 
of  this  apparent  inconsistency,  and  forces  him  into  vague  and  inconclusive 
language. 

Among  the  peculiarities  which  attend  corn  or  other  agricultural  pro- 
ducts this  is  one,  that  while  its  price  wavers  from  year  to  year  with  a 
much  wider  oscillation  than  the  products  of  any  other  species  of  labour,  its 
average  price  from  century  to  century  varies  only  by  a  gradual  and  slow 
advance.  The  former  of  these  is  the  maiket  price  determinable  simply 
by  demand  and  supply,  and  the  reason  of  its  wider  variations  is  to  be  found 
in  the  necessity  of  its  use.  Men  cannot,  as  in  other  articles,  put  a  re- 
straint upon  their  inclinations,  and  do  without  it ;  their  power  to  adopt  a 
substitute  is  extremely  limited,  and  thus  the  necessity  of  a  general  dis- 
tribution causes  its  price  to  rise  strictly  in  proportion  to  the  diminution  of 
the  supply. 

The  latter  of  these,  or  the  natural  price,  is  the  cost  of  production,  which 
consequently  rises  as  the  product  is  obtained  from  soils  of  inferior  fertility. 
It  is  not  correct,  however,  to  speak  of  the  cultivation  of  inferior  soils  as  the 
cause  of  this  higher  price,  it  is  not  their  actual  cultivation,  but  the  neces- 
sity of  cultivating  them  that  determines  it.  The  price  is  raised  before  the 
inferior  soil  is  brought  into  cultivation,  and  Would  rise  still  higher,  but  for 
such  extension  of  agi-iculture. 

A  rise  in  price  is  determined  by  the  deficiency  of  the  supply  as  compared 
with  the  demand  ;  a  fall  of  price  is  determined  by  a  surplus,  and  the  ave- 
rage price  is  determined  by  the  costs  of  production  on  the  poorest  soil  iit 
cultivation,  or  by  the  returns  of  the  last  capital  laid  out  on  lands. 

See  Malthas,  ch.  3  sect.  5,  6,  and  10.  Edinburgh  Review,  No.  LIX. 
art.  2.— £. 

IG 


126 


POI,ITICAL    ErONOMV. 


Nature  and 
Causes  of. 
Rent. 


Dislinclion 
between  Ag- 
riculture, 
Manufac- 
tures, and 
Commerce. 


Tendency  of 
Manufactu- 
red Products 
to  fall  in 
Price. 

Tendency  of 
Agricultural 
Products  to 
rise  in  Price. 


couragement  held  out  by  the  Legislature,  to  the  ardour  of  specu- 
lation, to  the  miscalculation  of  farmers,  or  to  any  other  cause, 
lands  of  the  sixth  degree  of  fertility  have  been  cultivated  ;  the 
increased  quantity  of  produce  that  must  thus  be  thrown  on  the 
market  will  plainly  dej)ress  prices  to  such  an  extent,  that,  instead 
of  yielding  average  profits  to  the  cultivators  of  No.  6,  they  will 
not  yield  them  to  the  cultivators  of  No.  5.  But  they  will  yield 
more  to  the  cultivators  of  No.  5  than  to  those  of  No.  6  ;  the  lat- 
ter, therefore,  will  be  first  driven  from  their  business  ;  and  when 
they  have  retired,  prices  will  rise,-  not  indeed  to  such  a  height 
as  to  enable  No.  6  to  be  cultivated,  but  so  high  as  to  enable  the 
cultivators  of  No.  5  to  continue  their  business  ;  that  is,  as  we 
have  already  shown,  to  the  precise  sum  that  will  enable  the  raisers 
of  the  last  portion  of  the  produce  necessary  to  supply  the  effec- 
tual demand  to  obtain  the  common  and  average  rate  of  profit. 
Should  the  demand,  instead  of  continuing  stationary,  increase  so 
that  it  could  not  be  supplied  without  cultivating  Nos.  6  and  7,  the 
price  will  have  to  rise  in  proportion  to  the  increased  expense  of 
cultivating  them.  But  to  whatever  extent  the  demand  might  in- 
crease, still,  if  such  an  improvement  were  made  in  agriculture, 
or  in  the  art  of  raising  corn,  as  would  enable  the  supply  to  be  ob- 
tained from  No.  1  only,  the  price  would  necessarily  and  infalli- 
bly fall  to  the  precise  sum  that  paid  the  expenses  of  its  cultiva- 
tors, and  rent  would  entirely  disappear. 

This  analysis  of  the  nature  and  causes  of  rent  discovers  an 
important  and  fundamental  distinction  between  agricultural  and 
commercial  and  manufacturing  industry.  In  manufactures,  the 
worst  machinery  is  first  set  in  motion,  and  every  day  its  powers 
are  improved  bj'  new  inventions  ;  and  it  is  rendered  capable  of 
yielding  a  greater  amount  of  produce  with  the  same  expense. 
And  as  no  limits  can  be  assigned  to  the  quantity  of  improved 
machinery  that  may  be  introduced — as  a  million  of  steam-engines 
may  be  constructed  for  the  same,  or  rather  for  a  less,  propor- 
tional expense  than  would  be  required  for  the  construction  of 
one — the  competition  of  capitalists  never  fails  to  reduce  the 
price  of  manufactured  commodities  to  the  sum  which  the  least 
expensive  method  of  production  necessarily  requires  for  their 
production. 

In  agriculture,  on  the  contrary,  the  best  machinery,  that,  is, 
the  best  soils,  are  first  brought  under  cultivation,  and  recourse  is 
afterward  had  to  inferior  soils,  requiring  a  greater  expenditure 
of  capital  and  labour  to  produce  the  same  supplies.  The  im- 
provements in  the  construction  of  farming  implements,  and  me- 
liorations in  agricultural  management,  which  occasionally  occur 
in  the  progress  of  society,  really  reduce  the  price  of  raw  pro- 
duce, and,  by  making  less  capital  yield  the  same  supplies,  have 
a  tendency  to  reduce  rent-  But,  the  fall  of  price  which  is  per- 
manentin  manufactures,  is  only  temporary  in  agriculture.  A  fall 
in  the  price  of  raw  produce,  by  enabling  every  class  to  obtain 
greater  quantities  than  before,  in  exchange  for  their  products  or 
their  labour,  raises  the  rate  of  profit,  and  leads,  of  course,  to  an 
increased  accumulation  of  capital.  But  the  industry  of  a  nation 
being  always  in  proportion  to  the  amount  of  its  capital,  this  ac- 
cumulation necessarily  leads  to  a  greater  demand  for  labour,  to 
higher  wages,  to  an  increased  population,  and,  consequently,  to  a 


POLITICAL    ECONOMY.  127 

I'urther  demand  for  raw  produce  and  an  extended  cultivation.  Nature  and 
Agricultural  improvements  check  for  awhile  the  necessity  of  gg"j°*°' 
having  recourse  to  inferior  soils  and  the  rise  of  rents  ;  but  the 
check  can  only  be  temporary.  The  stimulus  which  they,  at  the 
same  time,  give  to  population,  and  the  natural  tendency  of  man- 
•  kind  to  increase  beyond  the  means  of  subsistence,  is  sure,  in  the 
end,  to  raise  prices,  and  by  forcing  recourse  to  poor  lands,  to 
raise  rents. 

Mr.  MahhtH  has,  in  illustrating  this  important  distinction  be-  Earth  com- 
tween  agricultural  and  manufacturing  industry,  set  the  doctrine  MaUhuJ t'^' a 
of  rent  in  a  clear  and  striking  point  of  view.     "  The  earth,"  he  series  of  Ma- 
observes,  "  has   been  sometimes  compared  to  a  vast  machine,  dowed  with 
presented  by  nature  to  man  for  the  production  of  food  and  raw  p''^"^"' 
materials  ;  but  to  make  the  resemblance  more  just,  as  far  as  they  Powers 
admit  of  comparison,  we  should  consider  the  soil  as  a  present  to 
man  of  a- great  number  of  machines,  all  susceptible  of  continued 
improvement  by  the  application  of  capital  to  them,  but  yet  of 
very  different  original  qualities  and  powers. 

"  This  great  inequality  in  the  powers  of  the  machinery  em- 
ployed in  procuring  raw  produce,  forms  one  of  the  most  remark- 
able features  which  distinguishes  the  machinery  of  the  land  from 
the  machinery  employed  in  manufactures. 

"  When  a  machine  in  manufactures  is  invented,  which  will  pro- 
duce more  finished  work  with  less  labour  and  capital  than  be- 
fore, if  there  be  no  patent,  or  as  soon  as  the  patent  is  over,  a 
sufficient  number  of  such  machines  may  be  made  to  supply  the 
whole  demand,  and  to  supersede  entirely  the  use  of  all  the  old- 
machinery.  The  natural  consequence  is,  that  the  price  is  re- 
duced to  the  price  of  production  from  the  best  machinery,  and 
if  the  price  were  to  be  depressed  lower,  the  whole  of  the  com- 
modity would  be  withdrawn  from  the  market.* 

"  The  machines  whicli  produce  coin  and  raw  materials,  on 
the  contrary,  are  the  gifts  of  nature,  not  the  works  of  man  ;  and 
we  find  by  experience  that  these  gifts  have  very  different  quali- 
ties and  powers.  The  most  fertile  lands  of  a  country,  those 
which,  like  the  best  machinery  in  manufactures,  yield  the  great- 
est products  with  the  least  labour  and  capital,  are  never  found 
sufficient  to  supply  the  effective  demand  of  an  increasing  popula- 
tion. The  price  of  raw  produce,  therefore,  naturally  rises  till 
it  becomes  sufficiently  high  to  pay  the  cost  of  raising  it  with  in- 
ferior machines,  and  by  a  more  expensive  process  ;  and,  as  there 
cannot  be  two  prices  for  corn  of  the  same  quality,  all  the  other 
machines,  the  working  of  which  requires  less  capital  compar- 
ed with  the  produce,  must  yield  rents  in  proportion  to  their  good- 
ness.] 

*  As  this  is  not  the  liict  ia  any  case,  tliat  "  the  whole  of  the  commodity 
is  withdrawn  from  the  market,"  it  would  be  better  to  add  the  explanatory 
clause,  "  or  such  proportion  of  it  as  would  be  suilicient  by  producing  com- 
petition among  the  buyers  to  elevate  the  price  to  the  costs  of  produc- 
tion."— E. 

t  This  analysis  of  rent,  which  traces  it  to  the  diminishing  productive 
powers  of  the  soils  successively  brought  into  cultivation,  completely  over- 
tlirows  the  very  basis  upon  which  the  system  of  the  French  economists 
rested,  and  from  which  all  their  practical  deductions  were  drawn.  Instead 
of  Rent  being  as  they  regarded  it,  a  surplus  yield,  arising  from  the  bounty 
of  nature,   and  exalting  in  the  scale  of  productiveness  agricultural  labou.v 


\ 


128  FOLITICAL    ECONOMY. 

Nature  ond  "  Evcrj  extCDsive  country  may  thus  be  considered  as  possess- 
Eent*'  ^^  ing  3  gradation  of  machines  for  the  production  of  corn  and  raw 
materials,  including  in  this  gradation  not  only  all  the  various 
qualities  of  poor  land,  of  which  every  large  territory  has  gene- 
rally an  abundance,  but  the  inferior  machinery  which  may  be  said 
to  be  employed  when  good  land  is  further  and  further  forced  for  • 
additional  produce.  As  the  price  of  raw  produce  continues  to 
rise,  these  inferior  machines  are  successively  called  into  action  ; 
and,  as  the  price  of  raw  produce  continues  to  fall,  they  are  suc- 
cessively thrown  out  of  action.  The  illustration  hereused  serves 
to  show  at  once  the  necessity  of  the  actual  price  of  corn  to 
the  actual  produce,  and  the  different  effect  which  would  attend  a 
great  reduction  in  the  price  of  any  particular  manufacture,  and 
a  great  reduction  in  the  price  of  raw  produce. 

"  I  have  no  hesitation,  then,  in  affirming  that  the  reason  why 
the  real  price  of  corn  is  higher  and  continually  rising  in  countries 
which  are  already  rich,  and  still  advancing  in  prosperity  and 
population,  is  to  be  found  in  the  necessity  of  resorting  constantly 
(o  poorer  land — to  machines  which  require  a  greater  expendi- 
ture to  work  them — and  which  consequently  occasion  each  fresh 
addition  to  the  raw  produce  of  the  country  to  be  purchased  at  a 
greater  cost ; — in  short,  it  is  to  be  found  in  the  important  truth 
that  corn  is  sold  at  the  price,  necessary  to  yield  the  actual  supply  ; 
and  that,  as  the  production  of  this  supply  becomes  more  and  more 
difficult,  the  price  rises  in  proportion. 

"  I  hope  to  be  excused  for  having  dwelt  so  long,  and  present- 
ed to  the  reader  in  various  forms  the  doctrine  that  corn,  in  refer- 
ence to  the  quantity  actually  produced,  is  sold  at  its  necessary 
price  like  manufactures,  because  I  consider  it  as  a  truth  of  the 
highest  importance,  which  has  been  entirely  overlooked  by  the 
economists,  by  Dr.  Smith,  and  all  those  writers  who  have  repre- 
sented raw  produce  as  selling  always  at  a  monopoly  price." — 
(^Inquiry  into  the  Nature  and  Progress  of  Rent,  p.  37.) 

It  appears,  therefore,  that  in  the  earliest  stages  of  society,  and 
when  only  the  best  lands  are  cultivated,  no  rent  is  ever  paid. 
The  landlords,  as  such,  do  not  begin  to  share  in  the  produce  of 
the  soil  until  it  becomes  necessary  to  cultivate  lands  of  an  infe- 
rior degree  of  fertility,  or  to  apply  capital  to  the  superior  lands 
with  a  diminishing  return.  Whenever  this  is  the  case,  rent  be- 
gins to  be  paid  ;  and  it  continues  to  increase  according  as  culti- 
vation is  extended  over  poorer  soils  ;  and  diminishes  according 
as  these  poorer  soils  are  thrown  out  of  cultivation.  Rent,  there- 
fore, depends  exclusively  on  the  extension  of  tillage.  It  is  high 
where  tillage  is  widely  extended  over  inferior  lantis  ;  and  low 

above  all  its  other  forms,  this  proves  it  to  be  the  result  of  the  opposite 
principle,  viz. — that  while  in  other  operations  of  natural  ajjents  as  wind, 
fire,  steam,  the  bounty  of  nature  is  equal  and  unlimited,  in  land  alone,  it  is 
various  and  bounded.  That  rent  originates  from  this  peculiarity  is  evi- 
dent, because  it  requires  only  a  similar  limitation  of  quantity  or  variety 
of  power  in  the  other  natural  assents  immediately  to  effect  its  introduc- 
tion into  them  also.  If  we  suppose,  for  instance,  the  steam  engines  first 
made  to  appropriate  a  higher  or  mere  perfect  form  of  the  natural  agent 
employed  in  them,  than  those  subsequently  erected,  it  is  clear  that  the 
eailier  engines  like  the  supei-ior  soil,  would  command  a  rent  grounded  on 
this  distinction,  which  would  begin  to  be  paid  as  soon  as  the  demands  of 
society  for  the  products  resulting  from  their  use,  required  the  introduction 
of  those  of  inferior  power. —  E. 


.POLITICAL  ECONOMV.  129 

where  it  is  confiaed  to  the  superior  descriptions  only.     But  in  Nature  and 
no  case  does  rent  ever  enter  into  price.     For,  the  produce  rais-  K^nT*" 
ed  on  the  poorest  lands,  or  with  the  capital  last  applied  to  the 
cultivation  of  the  soil,  regulates  the  price  of  all  the  rest;  and 
this  produce  never  yields  any  surplus  above  the  common  and 
average  rate  of  profit. 

It  being  thus  established  that  the  circumstance  of  land  being 
appropriated,  and  rent  paid  to  the  landlords,  cannot  afiect  the 
price  of  commodities,  or  make  any  difference  whatever  on  the 
principle  which  regulates  their  exchangeable  value  in  the  earli- 
est stages  of  society,  we  proceed,  in  the  next  place,  to  inquire 
into  the  effects  of  the  accumulation  and  employment  of  capital, 
and  of  the  rise  and  fall  of  wages  on  the  value  of  commodities.* 

Sect.  IV. — Effect  of  the  Accumulation  and  Employment  of  Capi- 
tal, and  of  Fluctuations  in  the  Rate  of  Wages  on  Exchangeable 
Value.] 

It  will  be  remembered,  that  the  comparative  quantities  of  la-  vaiuo  of 
hour  required  to  produce  commodities,  and  to  bring  them  to  J^°X"ed  by' 
market,  formed,  in  the  early  ages  of  society,  and  before  capital  UK-^mount^^ 
was  accumulated,  the  principle  by  which  their  comparative  or  i^^w  aliV 
exchangeable  value  was  regulated.  But  capital  is  nothing  more  °||^^^^^p;'^\^ 
than  the  accumulated  produce  of  anterior  labour  ;  and  when  it  their  Pro-  ' 
is  employed  in  the  production  of  commodoties,  their  value  must  d"cuon. 

*  The  section  now  ended  deserves  to  be  thoroughly  studied  by  the  stu- 
dent. It  contains  the  elucidation  of  a  fundamental  principle  of  society, 
and  may  be  considered  one  of  the  main  pillars  upon  which  the  science  now 
rests.  In  practical  importance  it  yields  to  that  which  identifies  private  in- 
terest with  public  prosperity,  and  free  trade  with  mutual  benefit ;  but  as 
a  fundamental  law  in  the  analysis  of  public  wealth,  there  is  perhaps  none 
of  equal  importance  ;  the  profits  of  capital  and  the  rate  of  wages,  and  con- 
sequently the  accumulation  of  wealth  and  the  state  of  population,  are  all 
greatly  modified  if  not  directly  regulated  by  the  laws  which  it  imposes. 
Its  discovery  or  rather  its  elucidation  is  the  gi-eat  glory  of  the  school  of  Ri- 
cardo,  and  unquestionably  the  greatest  advance  which  has  been  made  in 
Political  Economy  since  the  time  of  Adam  Smith.  It  may  be  said  indeed 
to  have  given  a  new  aspect  to  the  analytical  part  of  the  science,  and  to  have 
opened  to  the  student  a  new  field  of  inquiry.  In  prosecuting  it,  however, 
he  must  take  care  lest  he  be  misled  by  the  simplicity  and  beauty  of  the 
analysis  into  a  disregard  of  other  operating  causes,  more  incidental  in  their 
nature  but  equally  operative  when  they  exist,  and  by  which  the  character 
of  the  result  is  always  modified,  and  sometimes  perhaps  wholly  changed. 

As  this  forms  one  of  the  peculiar  principles  on  which  the  reputation  of 
Ricardo  rests  as  an  improver  of  this  science,  it  may  not  be  uninteresting  to 
the  reader  to  have  his  merits  here  summed  up  by  one  who  fully  under- 
stands and  highly  appreciates  them. 

They  are  thus  stated  by  our  author  in  his  "  Discourse  on  Political 
Economy :" 

1.  "  That  rent  is  altogether  extrinsic  to  tlie  cost  of  production. 

2.  "  That  capital  being  the  produce  of  previous  labour,  and  Having  no 
value  except  what  it  derives  from  that  labour,  the  fact  of  the  value  of  the 
commodities  produced  by  its  agency  being  always  determined  by  the  quan- 
tities of  capital  laid  out  or  wasted  in  their  production,  shows  that  it  is  really 
determined  by  the  quantities  of  labour  bestowed  on  them. 

3.  "  That  a  rise  of  wages  occasions  a  fall  of  profits  and  not  a  rise  in  the 
price  of  commodities,  and  a  fall  of  wages  a  rise  of  profits  and  not  a  fall  of 
prices."     Introductory  Discourse,  p.  67. — E. 

t  The  ensuing  section  is  not,  in  the  Editor's  opinion,  entitled  to  the  same 
unqualified  commendation  with  the  last.  It  sets  out  on  the  sound  principle 
laid  down  bv  Smith,  that  exchangeable  value  includes  within  it  a  yeturn 


130  POLITICAL  ECONOMY. 

Exchangea-  plainly  be  regulated,  not  by  the  quantity  of  immediate  labour 
bie  VaJue.  ^^^^  ^^j.  j^y  jj^g  j^jj^j  qqantity  of  immediate  labour  and  of  accu* 
mulated  labour,  or  capital,  which  have  been  necessarily  laid  out 
in  their  production.  Suppose  that  an  individual  can  by  a  day's 
labour,  without  the  assistance  of  any  capital  whatever,  kill  a 
deer  ;  but  that  it  requires  a  day's  labour  to  construct  weapons 
necessary  to  enable  him  to  kill  a  beaver,  and  another  day's  labour 
to  kill  it,  it  is  evident,  supposing  the  weapons  to  have  been  ren- 
dered useless  in  killing  the  beaver,  that  one  beaver  really  took  as 
much  labour  to  kill  it  as  was  required  to  kill  two  deer,  and  must, 
therefore,  be  worth  twice  as  much.  The  durability  of  the  wea- 
pons, or  capital  of  the  beaver  hunter,  is  obviously  an  element 
of  the  greatest  importance  in  estimating  the  value  of  the  animals 
killed  by  him.  Had  the  weapons  been  more  durable  than  we 
have  supposed, — had  they  served,  for  example,  to  kill  twenty 
beavers  instead  of  one,  then  it  is  plain  the  quantity  of  labour 
required  to  kill  a  beaver  would  only  have  been  one  twentieth 
more  than  the  labour  required  to  kill  a  deer,  and  the  animals 
would,  of  course,  have  been  exchanged  in  that  proportion  to 
each  other.  With  every  extension  of  the  duration  of  the  wea- 
pons, the  value  of  the  deer  and  the  beaver  would  obviously  be 
brought  still  nearer  to  equality. 

It  appears,  therefore,  inasmuch  as  capital  is  nothing  but  ante- 
rior labour,  that  its  accumulation  and  employment  cannot  affect 
the  principle  which  makes  the  exchangeable  value  of  commodi- 
ties dependant  on  the  quantities  of  labour  required  for  their  pro- 
duction. A  commodity  may  be  altogether  produced  by  capital, 
without  the  co-operation  of  any  immediate  labour  whatever,  and, 
if  so,  its  value  in  exchange  will  plainly  be  regulated  by  the  quan- 
tity of  capital,  that  is,  of  labour  expended  in  its  production  :  or 
it  may  be  partly  produced  by  capital,  and  partly  by  immediate  la- 
bour, and  then  its  exchangeable  value  will  be  proportioned  to 
the  sum  of  the  two,  or,  which  is  still  the  same  thing,  to  the  total 
quantity  of  labour  bestowed  upon  it.  The  principles  we  have 
now  laid  down  are  almost  self-evident,  and  we  are  not  aware  that 
they  have  been  disputed  by  any  political  economist  of  considera- 

both  foi-  the  labour  and  capital  consumed  in  production.  This,  however,  is 
virtually  abandoned  by  identifying  capital  with  labour,  and  thus  coming 
round  again  to  the  fundamental  proposition  of  Ricardo  already  stated,  viz., 
that  exchangeable  value  is  I'egulated  by  labour  alone,  a  proposition  unte- 
nable in  practice,  as  has  been  pointed  out  in  some  of  the  preceding  notes. 

The  elucidation  which  follows  of  the  effects  of  fluctuations  in  the  rate 
of  wages  on  exchangeable  value  according  as  the  capital  employed  in  pro- 
duction are  of  the  same  or  different  degrees  of  durability,  offers  again  to 
the  student  one  of  those  marked  instances  of  novel,  acute,  and  sound  ana- 
lysis, which  give  attraction  and  value  to  the  writings  of  Ricardo.  The 
same  may  be  said  of  the  principle  which  follows  from  it  as  a  corollar)',  viz.. 
that  jirojils  varij  inversely  as  tvagcs.  This  last  is  admitted,  even  by  his  op- 
jjonents,  and  ranked  by  the  rcviever,  as  "  one  of  the  most  useful  and  im- 
portant of  all  the  truths  which  Mr.  Ricardo  has  established."  Quarterly 
Review,  Vol.  XXX.  p.  315. 

The  section  closes  witli  a  return  to  his  fundamental  but  fallacious  pro- 
])osition  that  labour  is  "  the  single  and  only  principle"  which  enters  into 
the  composition  of  exchangable  value. 

For  a  further  examination  of  th'^se  points,  see  Wealth  of  Nations,  Book 
I.  ch.  G  and  10,  ch.  1],  sect.  3.  Malthus,  ch.  2,  ch.  5,  sect.  2  and  4.  Say, 
Book  II.  Mills,  ch.  2,  sect.  3,ch.  3,  part.  3.  Ricardo,  ch.  1, 6,21,  and  30. 
Edinburgh  Review  of  Adam  Smith.  Vol.  VIl.  p.  470.— f^. 


POLITICAL  ECONOMY. 


131 


tion  ;*  but  a  considerable  difference  of  opinion  is  entertained  E^changea- 
respecting  the  effects  occasioned  by  the  employment  of  work- 
men by  capitalists,  and  by  fluctuations  in  the  rate  of  wages,  on 
value. 

It  does  not,  however,  seem  to  us  that  there  is  much  room  for  Jh^E^^;  ^j. 
these  differences.     Suppose  that  a  certain   quantity  of   goods,  workmenby 
twenty  pairs  of  stockings  for  example,  manufactured  by  inde-  ^^^J-JlJ^Ii'/^Vo 
pendent  workmen,  freely  exchanged  for  forty  pairs  of  gloves  also  ^i^Pnceof 
manufactured  by  independent  workmen,  they  would  necessarily  ^1°'"""' 
continue  to  do  so,  provided  the  quantity  of  labour  formerly  re- 
quired for  their  production  continued  invariable,  after  the  work- 
men had  been  employed  by  some  master  manufacturer.     In  the 
first  case  it  is  true,  as   Dr.  Smith  has  observed,  that  the  whole 
goods  produced  by  the  workmen  would  belong  to  themselves, 
and  that,  in  the  second  case,  they  would  have  to  share  them  with 
others.     But  it  must  be  recollected,  that  in  the  first  case  the 
capital,  or  accumulated  labour,  made  use  of  in  the  production  of 
the  commodoties,  belonged  to  the  -ji^orkmen,  and  that  in  the  latter 
case  it  has  been  furnished  them  by  others.     The  question  then 
comes  to  be.  Can  the  circumstance  of  the  labourers  voluntarily 
agreeing  to  give  a  portion  of  the  commodities  produced  by  them, 
as  an  equivalent,  or  compensation  for  the  advantage   and  assist- 
ance derived  from  the  use  of  the  capital,   or  labour  of  others, 
afford  any  ground  for  raising  the  value  of  the  commodities  ?    It 
is  evident  it  cannot.     The  profits  of  stock  are  only  another  name 

*  That  capital  is  nothing  more  than  the  accumulated  produce  of  ante- 
rior labour,  all  sound  economists  must  admit ;  but  that,  therelore,  the  re- 
turns of  capital,  are  to  be  regarded  as  the  same  with  the  wages  of  labour, 
is  a  very  different  position,  and  one  very  far  from  being  universally  assent- 
ed to.     How  far  it  is  from  satisfying  the  adherents  of  Adam  Smith,  may  be 
iudged  of  by  the  following  extract  from  the  Quarterly  Review  of  this  ar- 
ticle.    "  The  author,  (Mr.  M'Culloch,)  says  that '  the  profits  of  stock  are 
only  another  name  for  the  wages  of  accumulated  labour,'  p,  263,   and  it  is 
no  doubt  true,  that  if  the  value  of  commodities  be  resolvable  into  wages 
and  profits,  and  profits  be  only  another  name  for  wages,  the  whole  is  re- 
solvable into  wages.     It  is  equally  true,  that  if  five  be  another  name  for 
four,  two  and  two  will  equal  five.     But  whether  it  will  not  tend  to  con- 
fuse matters,  either  to  consider  five  as  another  name  for  four,  or  profits  as 
another  name  for  wages,  deserves  our  serious  consideration,"    Vol.  XXX. 
p.  311.     The  Editor  cannot  but  agree  with  Adam  Smith  and  the  reviewer, 
that  this  unnatural  simplification  of  things  so  obviously  different  as  labour 
and  capital,  or  wages  and  profits,  tends  to  confuse  instead  of  giving  clear- 
ness to  an  investigation  into  the  phenomena  of  production  and  price.     The 
analysis,  indeed,  is  just  as  far  as  it  goes  ;  capital  is  the  produce  of  previous 
labour— this,  however,  but  explains  its  origin  ;  an  analysis  into  its  opera- 
tions, showmg  that  it  obeys  the  same  laws  as  labour,  and  is  modified  by  the 
same  causes,  is  that  which  must  be  further  given  before  its  returns  can  be 
identified  with  those  of  labour,  and  before  profits  and  wages  are  to  be  used 
as  synonymous  terms.     But  this  our  author  has  not,  and  in  the  Editor's 
opinion,  cannot  show. 

The  wages  of  Ziying labour  are  governed  bylaws  peculiar  to  themselves 
and  grounded  upon  the  circumstances  of  vitality,  so  that  they  cannot  with- 
out error  be  confounded  with  those  which  govern  the  returns  of  capital,  or 
as  profits  may  be  termed,  the  wages  of  dead  labour.  A  single  illustration 
of  the  different  law  imposed  by  this  distinction  will  be  sufficient. 

The  wages  of  living  labour  have  an  assignable  minunum  ;  they  cannot 
sink  below  the  absolute  means  of  support,  or  they  react  with  uncontrollable 
power  if  ever  forced  below  it.  Profits  on  tlie  contrary  have  no  mimraum ; 
they  may  fall  below  any  assignable  limit,  caused  either  by  an  increased  sup- 
ply, or  by  a  diminished  means  of  profitable  investment.— 1?. 


133  POLITICAL    ECONOMY. 

Exchange-  fof  the  wages  of  accumulated  labour.  They  make  a  part  of  the 
able  Value,  p^j^g  ^f  every  commodity  in  whose  production  any  portion  of 
capital  has  been  wasted.  But  whether  the  capital  belongs  to  the 
labourer  himself,  or  is  furnished  him  by  another,  is  obviously  of 
no  consequence.  When  the  capital  does  not  belong  to  the  la- 
bourer, the  commodities  produced  by  him  are  divided  into  two 
specific  portions,  whereof  one  is  the  return  for  the  immediate 
labour,  and  the  other  for  the  capital,  or  accumulated  labour,  ex- 
pended in  producing  them.  But  the  aggregate  value  of  the  com- 
modities is  precisely  the  same  into  how  many  portions  soever 
they  may  be  divided.  A  shoemaker  who  manufactures  shoes  on 
his  own  account,  must  obtain  the  same  rate  of  profit  on  their 
^  sale,  that  would  accrue  to  a  master  shoemaker  were  he  em- 

ployed by  him  as  a  workman.  He  must  not  only  possess  a  capi- 
tal adequate  to  maintain  himself  and  his  family  until  his  shoes 
can  be  disposed  of,  but  he  must  also  be  able  to  provide  himself 
with  a  workshop  and  tools,  to  advance  money  to  the  tanner  to 
pay  his  leather,  and  to  provide  for  various  other  outgoings.  If 
he  did  not,  exclusive  of  the  ordinary  wages  of  labour,  realize 
a  rate  of  profit,  or  a  compensation  for  the  employment  of  his 
capital,  equal  to  the  profit  obtained  by  the  master  shoe-maker, 
it  would  obviously  be  for  his  advantage  to  lend  it  to  him,  and  to 
work  on  his  own  account ;  and  it  is  plain,  inasmuch  as  his  shoes 
could  not  be  sold  for  a  higher  price  than  those  of  the  capitalist, 
that  he  could  not  realize  a  greater  rate  of  profit. 

It  appears,  therefore,  that  the  circumstance  of  the  accumu- 
lated labour  or  capital,  and  the  immediate  labour  required  to 
produce  commodoties  being  furnished  by  different  classes  of 
people,  makes  no  difference  whatever  on  the  principle  which 
shows  that  their  exchangeable  value  depends  on  the  total  quan- 
tity of  labour  necessary  for  their  production.  It  now  only  re- 
mains to  trace  the  effects  of  fluctuations  in  the  rate  of  wages  on 
price.  When  we  have  done  this,  we  shall  have  exhausted  the 
subject. 
Effect  of  ^^  simplify  this  inquiry,  we  shall  divide  it  into  two  branches. 

Fluctuations  We  shall  inquire, ^r«<,  whether  fluctuations  in  the  rate  of  wages* 
Wageaon  "  have  any,  and  what  effects  on  the  relative  value  of  commodities 
p"^''"?"^^  produced  by  the  aid  of  capitals  of  equal  degrees  of  durability  ; 
and,  secondl  whether  these  fluctuations  have  any,  and  what  eflfects 
when  the  capitals  employed  are  of  unequal  degrees  of  dura- 
bihty. 
1st.  Effect  of     '•  When  every  class  of  producers  employ  either  fixed  or  cir- 
theseFtuctu- culating  Capitals,  of  precisely  the  same  degree  of  durability, 
the°CapitRi"  they  must  be  all  equally  afi'ected  by  a  rise  or  fall  of  wages. 
empioyeii  in  This  is  a  principle  which  is  equally  assented  to  by  Mr.  Ricardo 
areoftiie      and  Mr.  Malthus,  and  which  is  indeed  self-evident.*     But  when 
of  Duraifi-''^  such  is  the  case,  it  is  plainly  impossible  that  a  rise  or  fall  of 
li'i'-  wages  can  occasion  any  variation  in  the  exchangeable,  or  compa- 

*  It  is  necessary  to  o'bserve,  that  this  relates  to  proportional  not  real 
wages,  and  to  a  general  not  a  partial  fluctuation  in  their  rate.  It  supposes 
the  rise  or  fall  to  be  universal  and  equal, — a  supposition  required  in  the 
settlement  of  principles,  though  rarely  or  never  existing  in  fact,  except  in 
the  gradual  and  almost  imperceptible  change  that  takes  place,  in  the  pro- 
gress of  society,  upon  the  expenses  of  corn  cultivation. — E. 

t  The  sentiments  of  Ricardo  on  this  point  will  be  found.  Chap.  V.  and 
VI.  Malthus,  Chap.  IV.  and  V.   See  also  Quarterly  Rev.  Vol.  XII.— -E. 


POLITICAL  ECONOMY.  133 

1-atlve  value  ot"  commodities.  To  revert  to  our  former  example,  Exchange- 
let  us  suppose  that  wages,  at  the  rate  of  one  shilling  a  day,  were 
paid  by  the  stocking  manufacturer,  one  pair  of  whose  stockings 
exchanged  for  two  pairs  of  gloves,  and  that,  from  some  cause  or 
other,  the  wages  of  his  workmen  have  been  doubled,  or  raised 
to  two  shillings,  the  question  is,  could  he  now  obtain  a  greater 
quantity  of  gloves  in  exchange  for  his  stockings  ?  It  is  obvious 
he  could  not.  He  could  not  urge  the  circumstance  of  his  being 
obliged  to  pay  a  greater  amount  of  wages  to  his  workmen,  as  a 
reason  why  the  glove  manufocturer  should  give  him  more  gloves 
in  exchange  for  his  stockings  ;  for,  the  latter  would  have  it  in 
his  power  to  reply,  that  the  same  rise  of  ■s.-agcs  affected  him  to 
precisely  the  same  extent.  If,  therefore,  one  pair  of  stockings 
was  previously  worth  two  pairs  of  gloves,  they  would  continue 
to  preserve  this  relation  to  each  other,  so  long  as  the  quantities 
of  labour  required  for  their  production  was  not  varied,  whatever 
might  be  the  fluctuation  of  wages — whether  they  fell  to  a  six- 
pence, or  rose  to  a  guinea  a  day.  Even  if  the  price  of  commo- 
dities rose,  which  it  could  not,  when  wages  rose,  that  would  be 
of  no  advantage  to  the  producers.  Commodities  are  always 
bought  by  commodities,  or  by  labour.  Of  what  consequence, 
then,  could  it  be  to  a  capitalist,  when  wages  rose,  to  sell  his 
commodities  at  an  equal  advance  ;  when  he,  in  his  turn,  Avould 
be  obliged  to  give  so  much  more  for  every  commodity  which  he 
purchased  ?  If  wages  rise  50  per  cent,  a  producer,  a  farmer, 
for  example,  would  be  precisely  in  the  same  condition,  whether 
he  sold  his  corn  for  50 per  cent,  advance,  and  gave  an  additional 
50  per  cent,  as  he  would  be  obliged  to  do,  for  his  hats,  shoes, 
clothes,  &c.  &c.  or  sold  his  corn  at  its  former  price,  and  bought 
all  the  commodities  which  he  consumed  at  the  prices  he  had  for- 
merly given  for  them. 

In  order  further  to  illustrate  this  principle,  we  may  be  allowed 
to  make  a  supposition,  which,  although  it  can  never  actually 
take  place,  will  serve  to  set  our  doctrine  in  a  clearer  point  of 
view.  Should  the  quantities  of  labour  required  for  the  pro- 
duction of  every  species  of  commodities  be  increased  in  ex- 
actly the  same  proportion,  it  is  plain  their  exchangeable  values 
would  remain  unaltered.  Their  real  price  would,  however,  be 
augmented.  A  bushel  of  corn  would  not  then  exchange  for  a 
greater  quantity  of  muslins  or  of  broad  cloth,  than  it  did  before 
the  increased  expense  of  its  production  ;  but  each  would  be  the 
produce  of  a  greater  quantity  of  labour.  In  such  circumstan- 
ces, the  prices  of  commodities  would  remain  stationary,  while 
the  wealth  and  comforts  of  the  society  would  be  materially  di- 
minished. Every  person  would  have  to  make  greater  exertions 
to  obtain  a  given  quantity  of  any  one  commodity  ;  but  as  the  ex- 
pense of  producing  all  commodities  is,  by  the  supposition,  equally 
increased,  it  would  not  be  necessary  to  make  any  greater  exer^ 
tions  to  obtain  one  than  another,  and  their  comparative  values 
n'ouldbe  totally  unafi'ected. 

But,  if  a  general  and  equal  increase  of  the  quantity  of  labour 
required  for  the  production  of  commodities  could  not  alter  their 
relative  values  to  one  another,  how  is  that  to  be  effected  by  a 
general  and  equal  increase  of  the  wages  paid  for  that  labour  ? 
The  thing  is  obviously  impossible.     If  a  beaver  exchanged  foy 

17 


134  '  FOLITiCAL    EtONOMV. 

Exchange-  a  deer,  when  wages  were  at  one  shilling  a  day,  it  must  do  the 
able  Value,  g^me  when  they  are  increased  to  two  shillings,  or  ten  shillings, 
or  twenty  shillings.  However  high  wages  might  be  raised,  the 
market  price  of  the  beaver  and  deer  would  continue  unchanged. 
After  wages  had  been  raised,  the  value  of  the  deer  would  be 
differently  divided — a  greater  share  would  belong  to  the  labourer, 
and  a  less  to  the  capitalist ;  but  that  would  be  the  only  effect  pro- 
duced. The  real  price  of  the  commodities  would  not  be  in  the 
least  influenced  by  this  rise  of  wages.  The  quantity  of  labour 
required  for  their  production  would  not  be  increased ;  and  it 
would,  therefore,  be  equally  easy  to  obtain  them. 
'^.  Eflcctof  II.  We  have  seen  by  the  investigation  under  the  preceding 
aUons^when  head,  that,  where  the  fixed  or  circulating  capitals  employed  in 
t'le  ^''ipitaiB  the  production  of  commodities  are  of  equal  degrees  of  dura- 
Production"  bility,  fluctuations  in  the  rate  of  wages  affect  all  classes  of  pro- 
are  of  dejer  ,|y(,g,.g  j^  j^j^g  same  extent,  and  have,  therefore,  no  influence  on 
Dmabiiity.  the  exchangeable  value  of  commodities,  or  on  their  price.  But 
%vhen  the  capitals  employed  are  of  diff'erent  degrees  of  dura- 
bility, this  is  not  the  case.  Fluctuations  in  the  rate  of  wages 
cannot,  in  such  circumstances,  equally  affect  every  class  of  pro- 
ducers, and  the  natural  and  indestructible  equilibrium  of  profit 
could  not  be  maintained  without  a  variation  in  the  relative  value 
of  their  products.  To  illustrate  this,  let  us  suppose,  that  a  cer- 
tain quantity  of  goods,  the  produce  of  fixed  capital  or  machinery 
fitted  to  last  many  years,  freely  exchange  for  a  certain  quantity 
of  other  goods  entirely  produced  by  manual  labour.  It  is  plain 
they  could  not  continue  to  be  exchanged  on  this  footing,  after  a 
rise  or  fall  of  wages.  For  the  proprietor  of  the  machinery 
would  be  very  little  afl'ected  by  such  fluctuations,  while  the  pro- 
prietor of  the  goods  produced  by  manual  labour  would  be  very 
seriously  affected  by  them.  And,  therefore,  when  wages  fluc- 
tuate, the  relative  values  of  the  goods  produced  by  capitals  of 
different  degrees  of  durability  must  also  fluctuate — that  is,  they 
must  be  adjusted  so  that  they  may  still  continue  to  yield  the  same 
common  and  average  rate  of  profit.  Let  us  now  endeavour  to 
trace  the  mode  in  which  this  adjustment  is  effected. 

The  arguments  we  have  brought  forward,  to  show  the  impos- 
sibility of  fluctuations  in  the  I'ate  of  wages,  affecting  the  ex- 
changeable value  of  commodities  produced  by  capitals  of  the 
same  durability,  were  first  advanced  by  Mr.  Ricardo.  He,  too, 
Avas  the  first  who  endeavoured  to  analyze  and  discover  the  pre- 
cise effects  of  fluctuations  in  the  rate  of  wages  on  commodities, 
when  the  capitals  employed  in  their  production  were  not  of  the 
same  degree  of  durability.  The  results  of  his  researches  in 
this  most  difficult  branch  of  the  science  were  still  more  impor- 
tant, and  more  completely  at  variance  with  the  universally  re- 
ceived opinions  of  political  economists.  Mr.  Ricardo  not  only 
showed  that  it  was  impossible  for  any  rise  of  wages  to  raise  the 
price  of  all  commodities,  but  he  also  showed,  that  in  many 
rases  a  rise  of  wages  necessarily  led  to  a  fall  of  prices,  and  a 
fall  of  wages  to  a  rise  of  prices  !  The  novelty  of  these  opi- 
nions, aud  the  talent  and  ingenuity  with  which  they  were  sup- 
ported, immediately  recommended  them  to  general  notice ;  and 
the  repeated  examinations  to  which  they  have  been  subjected 
have,  served  to  confirm  their  truth,  and  to  set  them  in  a  slill 


POLITICAL    ECONOMY.  135 

clearer  point  of  view.  Some  of  the  subordinate  doctrines  re-  Exciian»e- 
specting  value  advanced  by  Mr.  Ricardo  in  the  first  and  second  *'"'*'  ^*'"'' 
editions  of  his  Principles  of  Political  Economy  and  Taxation, 
were  opposed  by  Mr.  Malthus  in  his  recent  publication.  But 
Mr.  Malthus  does  not  attempt  to  invalidate  the  leading  princi- 
ples established  by  Mr.  Ricardo  ;  and  the  alterations  and  cor- 
rections which  the  latter  has  made  in  the  third  edition  of  his 
work,  have  gone  far  to  remove  the  objections  of  Mr.  Malthus.* 

Suppose  a  manufacturer  has  a  machine  worth  20,000/.  of  a  Tf^a  Rise  of 
high  degree  of  durability,  and  which  can,  without  the  assistance  ^l^frofitsri't 
of  any  manual  labour,  produce  commodities.     If  protits  were  "'"^' '•j^*'^ . 
at  10 per  cent.,  the  commodities  produced  by  this  machine  would  Goods nhicf- 
sell   for  2000/.,  together  with  a  very  small  addition  to  replace  jf/^^'^^^j""' 
its  wear  and  tear.j     Now,  it  is  quite  certain,  that  if,  from  any  t'apiiai  <n- 
cause  whatever,  profits  either  rise  or  fall,  the  price  of  the  goods    '"^'""'^" 
produced  by  this  machine  would  also  rise  or  fall. — (Malthus's 
Principles  of  Political  Economy,  p.  92.)     If  profits  %vere  to  rise 
to  15  per  cent.,  the  price  of  the  goods  produced  by  the  machine 
must,  in  order  that  its   owner  may  obtain  the  same  profit  with 
other  capitalists,  rise  to  3000/.  ;  and  if,  on  the  other  hand,  pro- 
fits fall  to  five  per  cent.,  the  price   of  his  goods  must,  for  the 
same  reason,  fall  to  1000/.     If,  therefore,  it  can  be  shown  that 
a  rise  of  wages   reduces  the   rate   of  profits,  it  is  plain  it  must 
also  reduce  the  exchangeable  value,  or  price,  of  all  such  com- 
modities as  are  chiefly  produced  by  machinery,  or  fixed  capital 
of  a  considerable  degree  of  durability,  or  by  circulating  capital 
returnable  at  distant  periods,  and  vice  versa.     But  it  is  not  diffi- 
cult to  show  that  this  is  really  the  case,  and  that,  in  point  of 
fact,  profits  always  fall  when  wages  rise,  and  rise  when  wages 
fall. j 

*  Of  the  ingenuity  and  originality  of  this  analysis  by  Ricardo  there  can 
be  no  question  ;  it  is  equal  in  acuteness  to  the  elucidation  of  rent,  already 
treated  of,  and  perhaps,  second  only  to  it  in  the  important  deductions  that 
flow  from  it.  But  among  these  cannot  be  admitted  the  one  its  author 
was  most  strenuous  in  deducing  from  it,  viz.  that  labour  forms  the  sole 
element  of  exchangeable  value.  The  objections  to  which  this  position  are 
liable  are  so  strong,  that  even  Mr.  Ricardo  himself  seems  to  have  vacilla- 
ted in  his  final  decision,  and  to  have  thereby  been  led  into  a  modification 
of  it,  which  retains  the  error  while  it  Tirtually  abandons  the  principle  for 
which  he  was  contending.  "  I  affirm  only,"  says  he,  "  that  their  relative 
values  (i.  e.  of  commodities)  will  be  governed  by  the  relative  quantities 
of  labour  bestowed  on  their  production." — (^Principles,  &c.  Ch.  I.  sect.  6. 
last  sentence.) — E. 

■  t  So  small  a  sum  as  two  shillings  and  elevenpence  would  be  sufficient 
for  this  purpose,  if  the  machine  would  last  for  100  years  ;  for  an  annuity 
of  two  shillings  and  elevenpence  accumulating  for  100  years  at  10  per 
cent.,  would,  at  the  end  of  that  period,  amount  to  £20,000. 

:}:  The  reader  must  again  be  reminded  that  it  is  not  every  market  varia- 
tion of  wages,  that  answers  to  the  rise  or  fall  here  spoken  of.  Our  author 
has  reference,  as  he  afterward  explains  himself,  to  a  real  rise  or  fall,  or  in 
other  words,  to  the  greater  or  less  proportion  which  the  workman  receives 
of  the  product  of  his  labour.  This,  it  is  obvious,  is  equivalent,  inversely, 
to  a  rise  or  fall  of  profits  ; — the  product  of  the  labour  of  the  workman  be- 
ing that  sum  by  the  division  of  which  both  wages  and  profits  are  determi- 
ned : — that  which  goes  not,  therefore,  to  one,  is  necessarily  added  to  the 
portion  of  the  other. 

The  difierence  between  real  and  nominal  wages  arises  from  the  inter- 
vention of  money  as  a  measure  of  value.  This  measure  being  itself  va- 
riable, the  change  may  take  place  either  from  its  own  variations,  or  from 
those  of  the  commodity  it  is  brought  to  measure,  and  thus  a  market  rise  of 


136 


POLITICAL   ECOXOJMV. 


Exchange- 
able Value. 


Profits  vai7 
inversely  as 
Vages. 


It  is  plain,  from  what  has  been  previously  stated,  that  to 
whatever  extent  wages  might  rise,  it  would  be  impossible  for 
the  producers  of  any  species  of  commodities,  whether  the  capi- 
tals employed  in  their  production  were  returnable  in  a  day,  or 
week,  or  any  other  period,  to  obtain  a  larger  share  of  the  com- 
modities produced  by  others  of  the  same  class, — that  is,  whose 
capitals  were  returnable  in  ecjiial  periods  with  their  own.  Sup- 
pose wages  rise  ten  or  twenty  per  cent.,  that  would  not  enable 
the  holder  of  a  capital  returnable  every  month,  or  every  twelve 
months,  to  obtain  any  additional  value  in  exchange  for  his  com- 
modities from  such  of  his  fellow  capitalists  as  were  affected  to 
precisely  the  same  extent  with  himself  by  the  rise  of  wages, — 
that  is,  whose  capitals  were  returnable  in  the  very  same  period 
as  his  own.  This  is  as  absolutely  impossible  as  it  is  to  change 
the  relation  of  proportional  numbers  by  multiplying  or  dividing 
them  all  by  the  same  number  ;  and,  therefore,  it  cannot  be  true 
that  a  rise  of  wages  will  raise  the  price  of  any  one  commodity, 
as  compared  with  all  other  commodities. 

But,  if  a  rise  of  wages  cannot  do  this,  it  is  demonstrably  cer- 
tain it  must  lower  profits.  Let  us  suppose  that  the  numbers  1 , 
2,  3,  4,  5,  6,  7,  8,  9,  and  10,  represent  capitals  of  correspond- 
ing degrees  of  durability.  When  wages  fluctuate,  the  proprie- 
tors of  the  least  durable  capitals,  numbers  1,  2,  3,  4,  and  5,  are 
plainly  more  affected  thereby  than  the  proprietors  of  the  more 
durable  capitals,  numbers  6,  7,  8,  9,  and  10.  Let  us  suppose 
that  wages  rise,  and  let  us  endeavour  to  discover  what  would 
be  the  effect  of  this  rise  on  the  holder  of  a  capital  of  the  tcnUi 
degree  of  durability.  AVe  have  already  shown  that  whatever 
might  be  the  amount  of  the  rise — whether  it  were  1,  10,  or  100 
per  cent.,  the  holder  of  such  a  capital  could  not  possibly  obtain 
any  additional  quantity  of  the  commodities  belonging  to  other 
producers  whose  capitals  were  also  of  the  tenth  degree  of  du- 
rability ;  and  in  so  far,  therefore,  as  this  class  of  commodities 
is  concerned,  profits  will  be  reduced  to  the  precise  extent  that 
wages  have  risen.  But  the  holders  of  the  other  capitals  are 
all  of  them  more  affected  by  the  rise  of  wages  than  the  holders 
of  No.  10  ;  and  if  we  took  either  of  them  as  a  standard  by 
which  to  measure  profits,  they  would  appear  to  have  fallen  in  a 
still  greater  proportion. 

It  is  absolutely  certain,  therefore,  that  profits  vary  inversely 
as  wages, — that  is,  they  fall  when  Ti-ages  rise,  and  rise  w/ien  Tcages 
fall.  But  owing  to  the  different  and  ever  varying  proportions 
in  which  fixed  and  circulating  capital  and  immediate  labour  are 
employed  in  the  production  of  commodities,  it. is  extremely  diffi- 
cult to  discover  the  precise  extent  to  which  any  given  fluctua- 
tion in  the  rate  of  wages  affects  profits.  We  shall,  however, 
state  three  different  cases  which  will  briefly,  and,  we  hope, 
satisfactorily,  elucidate  the  manner  in  which  fluctuations  in  the 

wages  may  denote,  either  an  appreciation  of  labour — that  is  a  real  rise,  or 
a  depreciation  of  money,  "which  is  consequently  but  a  nominal  rise.  It  is 
to  the  real  rate  of  wages  only  tliat  science  looks :  on  its  variations  depend 
the  comforts  of  the  poor  and  the  profits  of  the  rich.  The  nominal  rate  is 
a  mere  fiction  of  language,  or  ratlier  tlie  error  of  expression  arising  from 
the  adoption  of  an  imperfect  standard  of  value,  and  taken  into  the  account 
by  the  Political  Economist,  only  to  guard  against  the  erroneous  deductions 
that  might  unwarily  be  drawn  from  it. — F. 


POLITICAL    ECONOMY.  137 

rate  of  wages  always  operate,  and  the  method  to  be  followed  in  Exchange- 
estimating  their  influence  on  profits.  abicVaiue. 

1.  If  all  commodities  were  produced  by  immediate  labour,  or  Method  of 
by  capital  employed  in  the  payment  of  wages,  it  is  obvious  that  theEffecfsof 
every  rise  of  wages   would   cause   an   equal  fail  of  profits.     A  ^''f '"^''°" ^ 
capitalist  who  employed  1000/.  in  the  payment  oi  wages,  must,  Wages  on 
if  profits  were  at   10  per  cent.,  sell  the  commodities  for  llOOl.  ^''"''*'^- 
But  when  wages  rise  5  per  cent.,  or  to  1050/,.  he  would  not  be 

able  to  sell  his  commodities  for  more  than  1 100/.  ;  for  money  is 
itself  a  commodity,  and  as,  by  the  supposition,  all  commodities  are 
prodticed  by  immediate  labour,  the  rise  of  wages  would  affect  the 
producers  of  money  in  the  very  same  degree  that  it  affected  all 
other  producers.  In  this  case,  therefore,  it  is  plain  every  rise 
of  wages  will  equally  sink  profits,  and  every  fall  of  wages  will 
equally  raise  them. 

2.  If  all  commodities  were  produced,  one  half  by  immediate 
labour,  and  the  other  half  hy  capital,  profits  would  only  fall  to 
half  the  extent  that  wages  rose.  Suppose  a  capitalist  employs 
500/.  in  the  payment  of  wages,  and  500/.  as  a  fixed  capital,  when 
profits  are  at  \0  per  cent.,  the  commodities  produced  must,  as  be- 
fore, sell  for  1100/.  If  wages  rose  6  per  cent.,  the  capitalist 
would  have  to  pay  525/.  as  wages,  and  would,  consequently,  only 
retain  75/.  as  profits.  In  this  case,  therefore,  a  rise  of  wages 
to  the  extent  of  b  per  cent,  would,  because  of  the  employment 
of  equal  quantities  of  capital  and  immediate  labour  in  the  pro- 
duction of  commodities,  only  sink  profits  2i  per  cent. 

3.  If  all  commodities  were  produced  by  capital  of  a  high  de- 
gree of  durability,  the  capitalists,  it  is  obvious,  would  not  be  at 
all  affected  by  a  rise  of  wages,  and  profits  would,  of  course, 
continue  as  before. 

Now,  suppose  that  commodities,  instead  of  being  wholly  pro- 
duced either  by  immediate  labour,  as  in  the  first  case,  or  wholly 
by  equal  quantities  of .  immediate  labour  and  of  capital,  as  in  the 
second,  or  wholly  by  fixed  capital  as  in  the  third,  are  partly  pro- 
duced in  the  one  mode  and  partly  in  the  other,  and  let  us  see 
what  effect  this  increase  of  5  per  cent,  in  the  rate  of  wages 
would  have  on  their  relative  values.  To  facilitate  this  inquiry, 
we  shall  distinguish  these  three  descriptions  of  commodities  by 
the  Nos.  1 ,  2,  and  3.  Now,  it  is  quite  evident  that  the  rise  of 
wages  has  affected  No.  1  2i  per  cent,  more  than  it  has  affected 
No.  2,  and  5  per  cent,  more  than  it  has  affected  No.  3.  No.  1 
must,  therefore,  as  compared  with  No.  2,  have  risen  2i  per  cent. 
in  exchangeable  value,  and  as  compared  with  No.  3,  it  must 
have  risen  5  per  cent. ;  No.  2  must  have  fallen  2\-  per  cent,  as 
compared  with  No.  1,  and  risen  9.^  per  cent,  as  compared  with 
No.  3  ;  and  No.  3  must  have  fallen  5  per  cent,  as  compared 
with  No.  1,  and  2^  per  cent,  as  compared  with  No.  2.  If  wages, 
instead  of  rising,  had  fallen,  the  same  effects  would  obviously 
have  been  produced,  but  in  a  reversed  order.  The  proprietors 
of  the  commodities  of  the  class  No.  1  would  gain  5  per  cent,  by 
the  fall ;  those  of  No.  2  would  gain  2^  per  cent.,  and  those  of 
No.  3  nothing  ;  and  the  relative  values  of  these  commodities 
would  be  adjusted  accordingly.* 

*  The  examples  we  have  here  given  are  substantially  the  same  with 
those  given  by  Mr.  Mill.  See  his  valuable  work  entitled  Elements  of  Po- 
litical Economy,  p.  77. 


138  POLITICAL    ECONOMY. 

Exchange-  Thus,  then,  it  appears,  inasmuch  as  any  commodity  taken  for 
able  Value,  g  standard  by  which  to  estimate  the  relative  values  of  other 
General  Rule  commodities,  must  itself  be  produced  by  capital  returnable  in  a 
vlct  ofTii  certain  period,  that  when  wages  rise,  all  commodities  produced  by 
riuciuations.  less  durable  capitals  than  those  which  produce  the  commodity 
taken  for  a  standard,  will  rise  in  exchangeable  value,  and  all  those 
produced  by  more  durable  capitals  will  fall ;  and  conversely 
when  wages  are  reduced.  Suppose,  as  before,  that  the  Nos.  1, 
2,  3,  4,  5,  6,  7,  8,  9,  and  10,  represent  capitals  of  correspond- 
ing degrees  of  durability.  If  a  commodity  produced  by  the 
least  durable  capital.  No.  1,  and  which  may  be  supposed  to  be 
wholly  employed  in  the  payment  of  wages,  be  taken  for  a 
standard,  all  commodities  whatever  produced  by  the  other  and 
more  durable  capitals  would  fall  in  value  when  wages  rose  ; 
and  if  we  suppose  those  produced  by  No.  2  to  decline  1  per 
cent.,  those  produced  by  No.  3  would  decline  2  per  cent.,  those 
produced  by  No.  4,  3  per  cent.,  and  so  on  until  we  arrive  at  No. 
10,  which  will  have  fallen  9  per  cent.  If,  on  the  other  hand,  a 
commodity  produced  by  the  moat  durable  capital,  No.  10,  and 
which  may  be  supposed  to  consist  wholly  of  highly  durable  ma- 
chinery, be  made  the  standard,  when  wages  rise,  all  the  commo- 
dities produced  by  the  other  less  durable  capitals  would  also 
rise  •,  and  if  those  produced  by  No.  9  rose  1  per  cent.,  those 
produced  by  No.  8  would  rise  2  per  cent.,  and  those  produced 
by  No.  1,  9  per  cent.  If  a  commodity  produced  by  capital  of  a 
medium  degree  of  durability,  as  No.  5,  and  which  may  be  sup- 
posed to  consist  half  of  circulating  capital  employed  in  the  pay- 
ment of  wages,  and  half  of  fixed  capital  or  machinery,  be  taken 
as  a  standard,  the  commodities  produced  by  the  less  durable 
capitals,  Nos.  4,  3,  2,  and  1,  will  rise  with  a  rise  of  wages,  on 
the  former  hypothesis,  the  first,  or  No.  4,  1  per  cent.,  the  se- 
cond, or  No.  3,  2  per  cent.,  &c.  ;  while  those  produced  by  the 
more  durable  capitals,  Nos.  6,  7,  8,  9,  and.  10,  will  fall,  the  first, 
or  No.  6,  1  per  cent.,  the  second,  or  No.  7,  2  per  cent.,  &c.  ex- 
actly the  reverse  of  the  other. 

Hence  it  is  obvious  that  the  effect  which  variations  in  the 
rate  of  wages  have  on  price  will  principally  depend  on  the  na- 
ture of  the  capital  employed  in  the  production  of  gold  and  sil- 
ver.* Whatever  may  be  the  proportions  of  circulating  capital 
appropriated  to  the  payment  of  wages,  and  of  fixed  capital  em- 
ployed in  the  production  of  the  material  of  which  money  is 
made,  all  those  commodities  which  are'produced  by  the  agency 
of  a  greater  quantity  of  labour  and  with  less  fixed  capital  or 
machinery,  will  rise  when  wages  rise,  and  fall  when  wages  fall ; 
but  those  that  are  produced  by  the  agency  of  a  less  quantity  of 
labour,  and  with  more  fixed  capital  or  machinery,  will  fall  when 
wages  rise,  and  rise  when  wages  fall ;  and  those  that  arc  pro- 
duced in  nearly  the  same  circumstances,  or  by  the  agency  of 

*  Supposing  this  to  be  the  case  where  gold  and  silver  form  the  uiedium 
of  exchange,  it  becomes  a  nice  question  how  far  the  substitution  of  a  paper 
currency  modifies  the  rule;  whether  it  is  to  be  estimated  as  the  result  of 
that  proportion  of  fixed  and  circulating  capital  required  by  the  specie  which 
it  represents,  or  of  that  which  is  necessary  to  its  own  munufacture,  or  lastly 
of  an  average  of  all  commodities  as  being  their  common  representative. 
This  is  a  question,  however,  of  too  refined  a  nature  for  tlie  Editor  at  pre- 
sent to  pursue, — it  is  here  thrown  out.  merely  as  an  analytic  speculation, 
to  the  zealous  student. — E. 


POLITICAL    ECONOMY^  139 

the  same  quanliiies  of  circulating  and  fixed  capital,  as  money,  Exchange- 
will  not  be  affected  by  the  fluctuations  of  wages.  "^  le^iue. 

It  should,  however,  be  observed  that  the  variations  in  the  ex-  Variations  of 
changeable  value  oi  commodities  caused  by  variations  in  the  aijie  Vaiuc 
rate  of  wages,  are  confined  within  very  narrow  limits,  and  can  rlu^.tua^fons 
hardly,  in  any  circumstances,  exceed  6  or  7  per  cent*  There  '" '{j^J.^^'^*' 
can  be  no  rise  of  wages  without  a  fall  of  profits.  The  produce  confined 
of  the  land,  or  rather  of  the  capital  which  pays  no  rent,  and  J!^\y""^'j?J 
which  governs  the  price  of  all  the  rest,  is  divided  between  th^ 
farmer  and  the  labourer,  and  the  more  that  is  given  to  the  lat- 
ter, the  less  will  plainly  remain  for  the  former.  The  same  is 
the  case  in  every  other  department  of  industry.  Whenever, 
therefore,  wages  rise,  profits  necessarily  and  unavoidably  fall  ; 
and  this  fall  not  only  checks  the  rise  that  would  otherwise  take 
place  in  the  price  of  the  goods  produced  by  less  durable  capitals 
than  the  medium  in  which  price  is  estimated  ;  but  it  also  checks 
the  fall  that  would  take  place  in  the  price  of  the  goods  produced 
by  more  durable  capitals.  To  exemplify  this,  let  us  suppose  a 
manufacturer  employs  a  capital  of  10,000/.,  one-half  being  em- 
ployed as  machinery,  and  the  other  half  as  a  circulating  capital 
appropriated  to  the  payment  of  wages.  If  profits  are  at  10 
jyer  cent.,  the  goods  produced  by  the  manufacturer  must  sell  for 
1 1,000/. t  Now,  suppose  wages  to  rise  one  per  cen^.,  if  the  price 
of  the  goods  were  proportionably  increased,  they  would  have 
to  sell  for  1 1 ,050/.  But  they  would  not  be  proportionably  in- 
creased ;  for  every  rise  of  wages  must  lower  profits.  Suppose, 
then,  that  profits  are  reduced  i  per  cent.,  the  goods  will  still  sell 
for  1 1 ,000/.  the  increase  of  50/.  caused  by  the  rise  of  wages,  being 
just  equivalent  tolhe  fall  of  50/.  caused  by  the  reduction  of  pro- 
fits. Although,  therefore,  a  rise  of  wages  has  a  necessary  ten- 
dency to  raise  the  exchangeable  value  of  one  class  of  commo- 
dities, and  to  lower  that  of  another  class,  the  fall  of  profits, 
which  must  inevitably  follow  every  rise  of  wages,  has  a  dif- 
ferent effect,  and  tends  to  sink  the  price  of  the  commodities 
which  the  increase  in  the  rate  of  wages  would  raise,  and  to  ele- 
vate the  price  of  those  which  the  same  increase  would  sink. 
In  the  great  majority  of  cases,  these  opposite  effects  mutually 
balance  each  other  ;  and  prices  continue  nearly  the  same,  after 
a  fall  or  rise  of  wages,  as  before. 

"  This  is  not  the  case  with  the  other  great  cause  of  variations 
in  the  value  of  commodities,  namely,  the  increase  or  diminution 
in  the  quantity  of  labour  necessary  to  produce  them.  An  alte- 
ration in  the  permanent  rate  of  profits,  to  any  great  amount,  is 
the  effect  of  causes  which  do  not  operate  but  in  the  course  of 
years  ;  whereas  alterations  in  the  quantity  of  labour  necessary 
to  produce  commodities  are  of  daily  occurrence.     Every   im- 

*  Ricardo  On  the  Principles  of  Political  Economy  and  Taxation,  3il 
edit.  p.  33. 

t  Is  there  not  an  error  in  this  calculation  ?  Of  the  capital  employed, 
one  half  is  fixed,  the  other  circulating :  the  annual  jeturns,  therefore,  will 
consist,  not  of  the  whole  amount,  but  merely  of  that  portion  which  is  cir- 
culating, together  with  interest  and  profits  on  tlie  whole,  that  is,  of  £6,000. 
That  which  is  yielded  by  the  half  fixed  in  machinery,  consists,  in  addition 
to  ordinary  inteiest  and  profits,  of  the  expenses  of  repair  and  renewal. 
This  variation,  however,  does  not  affect  the  soundness  of  our  author's  rea- 
soning, which  depends  simply  upon  the  proportion  employed  as  circulating: 
capital,  and  applied  to  the  payment  of  wages, — E, 


140  POLITICAL    ECONOMr. 

Exchange-    provcment  in  machinery,  in  tools,  in  building,  in  raising  the  raw 
able  Value,    ^jatprial,  savcs  labour,  and  enables  us  to  produce  the  commodity 
to  which  the  improvement  is  applied  with  more  facility,  and, 
consequently,  its  value  alters.     In  estimating,  then,  the  causes 
of  the  variation  in  the  value  of  commodities,  although  it  would 
be  wrong  wholly  to  omit  the  consideration  of  the  effect  produ- 
ced by  a  rise  or  fall  of  labour,  it  would  be  equally  incorrect  to 
attach  much  importance  to  it  ;  and,  consequently,  in  the  subse- 
quent part  of  this  work,  though  I  shall  occasionally  refer  to  this 
cause  of  variation,  I  shall  consider  all  the  great  variations  which 
take  place  in  the  relative  value  of  commodities  to  be  produced 
by  the  greater  or  less  quantity  of  labour  which  may  be  required 
to  produce  them."     (Ricardo,  Principles,  &c.  p.  33.) 
Variations  in      The  universally  received  opinions  respecting  the  effect  of  a 
Mo^e^'wl-  ^^^^  ^^  wages  on  the  price  of  commodities  have  obviously  origi- 
f;op  cause  of  uated  from  a  rise  in  the  money  price  of  commodities  being  almost 
Opinion.'''"^    always  confounded  with  a  rise  in  their  real  price.     But  these 
two  things  are  totally  distinct.     Real  wages,  as  we  shall  after- 
ward  show,  depend  on  the  proportion  of  the  produce  of  industry 
which  belongs  to  the  labourer.     They  are  high  when  this  propor- 
tion is  large,  and  they  are  low  when  it  is  small.*     It  is  to  real 

*  The  term  real  wages  admits  of  another  and  equally  important  inter- 
pi-etation.  By  it  we  may  imply,  the  value  of  the  labourer's  wages,  in  re- 
ference to  his  means  of  support.  In  this  sense,  wages  are  high  when  they 
afford  a  comfortable  provision  for  the  labourer,  or  rather  a  surplus  beyond 
it.  They  are  low  when  they  fail  to  fulfil  this  necessary  condition  of  tlie  con- 
tinuance of  labour,  whatever  be  the  rate  at  which  they  are  estimated  in 
money,  or  whatever  be  the  proportion  that  his  share  bears  to  the  whole 
product  of  his  labour. 

Hence  it  appears,  that  there  are  three  criteria  by  which  the  rate  of  wa- 
ges may  be  estimated,  in  comparing  them  in  different  periods  or  countries  ; 
these  it  is  very  important  that  the  student  should  not  confound. 

1.  The  money  price  of  labour, — which,  it  is  evident,  from  the  varying 
value  of  the  money  itself,  can  afford  no  real  or  useful  criterion.  This  con- 
stitutes nominal  wages, — and  often  varies,  while  real  wages  continue  the 
same,  or  remains  unchanged  while  real  wages  have  undergone  a  great  al- 
teration. This  criterion,  therefore,  is  to  be  noted  by  the  student,  only  that 
he  may  be  upon  his  guard  against  any  fallacious  deductions  drawn  from  it. 
Among  the  familiar  illustrations  of  its  fallacy  may  be  instanced,  the  false 
estimate  often  made  by  our  northern  labourers  and  mechanics,  of  the  profits 
to  be  realized  in  the  southern  states  ;  they  do  not  consider  that  the  high 
wages  they  receive  are  counterbalanced  by  the  high  prices  tliey  are  forced 
to  pay  for  almost  every  commodity  they  purchase. 

2.  The  second  criterion  ascertains  what  should  alone  bear  the  name  of 
"  real  wages," — since  they  determine  the  comfort  and  prosperity  of  the  la- 
bourer himself: — it  is  the  proportion  his  wages  boar  to  the  means  of  his 
support,  or  the  real  value  which  he  receives  in  return  for  his  labour.  It  is 
on  this,  whatever  may  be  the  monied  estimate  of  his  work,  that  depends 
the  independence  of  the  labourer,  the  comforts  of  the  lower  class  of  so- 
fiety,  and  the  well  being  of  the  whole  community.  This,  therefore,  is  the 
criterion  of  real  wages. 

3.  The  third  form  in  which  they  appear  is  tliat  of  proportional  wages, — 
or  the  ratio  which  the  workman's  portion  bears  to  tlie  whole  product  of  his 
labour.  This  is  the  criterion  which  determines  tlie  situation,  not  of  the 
labourer,  but  of  the  capitalist.  On  it  depend  tlie  profits  of  the  agricultu- 
rist, the  manufacturer,  and  the  merchant, — tliey  V)eing  but  the  residue  of 
the  fruits  of  labour,  after  the  labourer's  portion  is  witlidrawn. 

From  each  of  these  criteria  some  important  deductions  may  be  drawn, — 
from  the  first  we  learn  the  comparative  plenty  and  cheapness  of  the  pre- 
cious metals.  From  the  second,  the  general  happiness  of  society,  and  the 
comparative  increase  of  its  wealth  and  population.  From  the  third,  we 
learn  the  accumulation  of  capital,  the  extension  of  agriculture,  and  the 
rate  of  profits.— JE. 


POLITICAL    ECONOMV.  141 

wages  that  we  always  refer.  And  it  is  plain,  that  every  infe-  KxcUango- 
rence  respecting  the  rate  of  real  wages,  drawn  from  fluctuations  '''''^v*'"^. 
in  the  rate  of  money  wages  at  different  periods,  must  be  com- 
pletely erroneous,  if  we  have  not  estimated  such  money  wages 
with  reference  to  the  relative  values  of  money  and  commodities 
at  the  time  when  the  fluctuations  took  place.  The  money  wages 
of  labour  may  be  raised  from  Is.  to  2s.  or  5s.  a-day  ;  and  the 
real  wages  of  labour  may,  notwithstanding,  be  all  the  while  di- 
minishing. This  has  been  actually  the  case  in  Britain  during 
the  last  thirty-five  years.  Money  wages  were  in  1810  double 
what  they  had  been  in  1790  ;  but,  as  the  exchangeable  value  of 
our  currency  had,  in  the  interval,  been  more  than  proportionably 
reduced,  the  price  of  commodities  rose  still  faster  than  wages  ; 
and  the  proportion  of  the  produce  of  industry  belonging  to  the 
labourers,  or  their  real  wages,  was  consequently  diminished.  In 
such  a  case,  to  ascribe  the  fise  of  prices  to  the  rise  of  wages 
would  be  evidently  absurd.  In  no  case,  however,  will  it  be 
found  that  a  rise  of  real  wages  will  raise  the  price  of  all  com- 
modities. A  large  class  will  remain  stationary,  after  wages  rise  ; 
another  class  will  rise  a  little  ;  and  another  class  will  fall  a  little. 
All  considerable  variations  in  the  relative  value  of  commodities 
are  the  consequence  of  variations  in  the  quantity  of  labour  re- 
quired for  their  production,  and  not  of  variations  in  the  rate  at 
which  that  labour  is  paid. 

Colonel  Torcens  contends,  in  his  late  valuable  work  on  the  Exchange 
Production  of  Wealth,  in  opposition  to  the  theory  we  have  now  ofCommo'- 
endeavoured  to  establish,  that  after  capital  has  been  accumula-  dit>esdoes 

,.  iiif  !■••  not  depend 

ted,  the  relative,  or  exchangeable  value  or  commodities  is   noonthoauan- 
longer,  as  in  the  early  stages  of  society,  determined  by  the  total  taUmp*i^^yed 
quantities  of  labour  required  to  bring  them  to  market,  but  by '"  t'^^'f  Pro- 
the  quantities  of  capital  expended  on  their  production.     At  bot- 
tom, however,  this  theory  is  precisely  the  same  with  that  which 
we  have  just  explained.     Capital  is  nothing  but  immediate   la- 
bour accumulated  ;  and  to  say  that  the  exchangeable  value  of 
commodities  depends   on  the   quantity  of  it  employed  in   their 
production,  is  only  another  way  of  expressing  the  identical  pro- 
position we  have  illustrated.     Colonel  Torrens,  however,  and 
those  who  agree  with  him,  contend  that  the  dift'erence  between 
the  two  theories   is  not  apparent  but  real.     "   If,"  say  they. 
"  two  capitalists   employ   equal   stocks,  the   one  in  paying  the 
wages    of  masons  employed  to  build  a   house,   and  the  other  < 

in  purchasing  wine  after  it  has  been  put  into  casks,  and  keeping- 
it  until  it  has  become  fit  for  use,  then,  as  the  products  of  equal 
capitals  must  always  be  equal,  the  house  and  the  wine  will  be 
worth  precisely  the  same  sum,  though  it  is  plain  they  are  pro- 
duced by  very  different  quantities  of  labour."  This  case  is 
very  ingeniously  put ;  and  it  deserves  attention  from  the  oppor- 
tunity which  it  affords  of  explaining  a  point  respecting  which 
there  has  been  a  great  deal  of  misconception.  At  first  sight,  it 
certainly  seems  as  if  both  accumulated  labour  and  immediate 
labour  had  been  employed  in  the  construction  of  the  house,  and 
accumulated  labour  only  in  the  production  of  the  wine.  But, 
in  point  of  fact,  all  that  is  done  in  either  case  is,  to  change  the 
form  of  equal  capitals  ;  to  transmute,  if  we  may  so  speak,  a 
certain  quantity  of  capital,  through  the  medium  of  human  hands, 

18 


142  I'ULITICAL    ECONOMY. 

Exchange-    ifito  a  house  ;  and  to  transmute  the  same  quantity  ot'  stock. 

able  Value,  (h^ough  the  medium  of  natural  powers,  into  wine  fit  for  drink- 
ing. The  capital  which  is  consumed  by  the  mason  in  food  and 
clothes  is  plainly  not  expended  on  the  house,  but  on  himself; 
and  it  is  his  immediate  labour  only,  or  the  exertion  of  his  phy- 
sical powers,  that  forms  the  only  labour  really  expended  on  the 
house.  The  employer  of  the  mason  paid  him  his  wages,  not, 
as  Colonel  Torrens  supposes,  in  the  unreasonable  expectation, 
that  he  would  la}'  out  these  wages,  in  addition  to  the  labour  of 
his  hands,  on  his  house,  but  that  he  might  lay  out  the  wages  on 
himself,  and  give  him  his  labour  as  an  equivalent  for  them.  The 
object  which  the  builder  of  the  house  had  really  in  view  was. 
to  convert  a  certain  amount  of  capital  into  a  house,  and  to  ac- 
complish this  object,  it  was  necessary  that  the  capital  should, 
in  the  first  j)lace,  be  exchanged  for,  or  converted  into,  the  im- 
mediate labour  of  masons.  In  th'e  production  of  the  wine,  this 
species  of  transmiitation  was  not  necessary  ;  the  effect  which 
had,  in  the  first  case,  been  produced  by  the  agency  of  men, 
being,  in  the  second  case,  produced  by  the  agency  of  the  pro- 
cesses which  nature  herself  carried  on  in  the  casks.  It  is  clear, 
therefore,  that  no  greater  quantity  of  labour  was  required  to 
produce  the  house  than  to  produce  the  wine.  Different  «o^en<s 
were  employed  to  convert  the  capital  into  the  finished  commo- 
dities, but  that  was  all.  The  quantity  of  capital  which  set  these 
agents  in  motion  was,  in  both  cases,  exactly  the  ^ame,  and  conse- 
quently, both  products  were  brought  into  existence  by  the  same 
quantity  of  labour.* 

'■■''  II"  this  case  of  Colonel  Torrens  has  been  ingeniously  put,  it  has  been 
also  ingeniously  answered.  To  the  analysis  of  our  author  there  can  be  no 
valid  objection.  Capital  is  accumulated  labour,  and  wliether  it  operates 
for  the  production  of  value  through  the  medium  of  man's  hands,  or  of  the 
natural  agents  which  by  machinery  or  expensive  an-angements  are  made 
to  labour  in  its  attainment,  it  is  the  same  prime  agent  which  sets  them  to 
work,  and  by  which  they  may  be  estimated. 

But  to  deduce  from  this  analysis  the  identity  of  the  profits  of  stock  with 
wages,  a  proposition  which  makes  labour  the  only  element  of  exchangeable 
value,  is  not  only  to  confound  things  which,  however  similar  in  their  na- 
ture, are  diverse  in  their  operation,  but  is  to  maintain  an  opinion  at  war 
with  our  daily  experience.  The  leading  objections  to  the  laying  of  this 
refined  analysis  as  the  basis  of  the  science,  which  is  done  by  the  school  of 
Ricardo,  may  be  thus  stated  : 

1.  It  confounds  terms  which  the  common  language  and  apprehensions  of 
men  will  always  keep  distinct, — labour  and  capital, — wages  and  profits, — 
and  no  system,  we  may  be  assured,  will  long  stand,  however  analytically 
true,  which  thus  opposes  the  common  sense  and  daily  experience  of  men. 
To  persist  in  calling  capital  labour,  is  as  if  in  physical  science  the  experi- 
mentalist should  insist  upon  ranking  water  among  gaseous  bodies,  because 
it  was  such  in  its  original  elements. 

2.  In  identifying  profits  with  wages  these  writers  confound  things,  which 
by  their  own  acknowledgments,  are  governed  by  laws,  not  only  different, 
but  opposite  ;  see  p.  See  also  Adam  Smith,  Book  II.  chap.  vi.  where  he 
sliows  conclusively,  that  "  In  the  price  of  commodities  the  profits  of  stock 
constitute  a  component  part  altogether  different  from  the  wages  of  labour, 
and  regulated  by  quite  chtferent  principles."  The  same  objection  applies 
to  reducing  under  one  head  capital  and  labour, — they  obey,  as  lias  been 
already  shown,  different  laws,  and  are  liable,  respectively,  to  peculiar  limi- 
tations. If  the  productive  services  of  capital  and  man  be  only  distinguished 
as  dead  and  living  labour,  then  the  generic  term  labour  will  unquestionably 
apply  indifferen'tljT'lo'bpth,  and  all  reasoning  in  relation  to  the  subject  will 
lie  true  so  loQg;iaiBbt!l'e.tBnn  is  used  in  its  generic  sense,  as  including  all  the 


POLITICAL  ECONOMY.  143 

The  error  into  which  Colonel  Torrens  has  fallen,  shows  the  Exchange- 
necessity,  in  estimating  the  cost  of  commodities,  of  always  sepa-  "  ®  *  ""• 
rating  between  the  capital,  or  accumulated  labour,  expended  in 
the  payment  of  wages,  and  the  immediate  labour  which  that 
capital  employs.  The  sum  of  these  two  really  amounts  to  twice 
the  quantity  of  labour  actually  expended  on  the  commodities. 
The  capital  given  as  wages  to  the  labourer  is  mei'ely  the  price, 
or  equivalent  of  his  labour  ;  and  the  cost  of  pi-oducing  the  com- 
modity must,  therefore,  be  determined  by  the  amount  of  wages, 
or  of  immediate  labour  given  for  these  wages,  taken  singly  and 
not  together.  When  fixed  capital  is  used,  the  cost  of  the  com- 
modity depends,  as  we  have  already  shown,  on  the  quantity  of 
immediate  labour,  or  circulating  capital,  and  of  fixed  capital, 
necessarily  expended  on  their  production. 

No  one  can  fail  to  observe  how  naturally  and  beautifully 
these  conclusions  harmonise  with  the  principles  we  endeavoured 
to  establish  when  treating  of  the  production  of  wealth.  Wo 
there  showed  that  no  commodity  which  it  did  not  require  some 
portion  of  labour  to  appropriate  or  produce,  could  be  possessed 
of  exchangeable  value,  or  become  wealth  ;  and  that  every  di- 
minution of  the  quantity  of  labour  required  to  produce  commo- 
dities, lowered  their  exchangeable  value,  and  made  them  more 
easily  obtainable  by  all  classes  :  And  the  analysis  we  have  now 
completed  shows,  that  labour  is  not  only  essential  to  the  existence 
of  exchangeable  value,  but  that  it  is  in  every  stage  of  society, 
from  the  rudest  to  the  most  improved,  the  single  and  only  princi- 
ciple  which  enters  into  its  composition,* 

specific  characteristics  of  the  agency  of  capital  as  well  as  of  man.  In  this 
case  the  only  objection  to  the  phrase  would  be  the  inexpediency  of  adopting 
a  general  term  to  comprehend  such  wide  specific  differences,  and  a  term 
besides  already  so  clearly  appropriated  in  common  speech  to  a  special 
meaning.  But  with  the  school  of  Ricardo  this  is  not  the  case,  it  is  not_ 
used  as  a  generic  term,  but  it  is  the  resolution  of  capital  into  labour  as 
that  term  is  commonly  apprehended ;  ihus  denying  to  capital  any  specific 
peculiarities.  It  is  in  this  sense  that  the  doctrine  is  to  be  denied  as  incon- 
sistent with  fact. 

3.  The  great  principle  which  they  deduce  from  this  supposed  identity, 
is  that  labour  is  "  the  single  and  only  element  which  enters  into  the  com- 
position of  exchangeable  value," — this  is  one  at  variance  with  fact  in  so 
many  cases  as  not  to  entitle  it  to  be  be  regarded  as  a  fundamental  proposi- 
tion. It  is  indeed  inconsistent  with  it  in  all,  unless  we  admit  the  gratui- 
tous assumption,  which  renders  the  proposition  itself  nugatory,  of  the  term 
labour  as  involving  the  operations  of  capital :  "  without  this  strange  and 
most  uncalled  for  misnomer,"  to  use  the  language  of  an  adherent  of  Adam 
Smith,."  how  is  it  possible  to  say,  that  commodities  exchange  with  each 
other  according  to  the  quantity  of  labour  worked  up  in  them,  that  is,  that 
fifty  pounds  worth  of  kept  wine  has  had  the  same  quantity  of  labour 
worked  up  in  it  as  fifty  pounds  worth  of  stone  walls  sold  as  soon  as  built? 
or  that  fifty  pounds  worth  of  young  firs  planted  thirty  years  ago  on  a  bar- 
i-en  heath  had  cost  in  their  production  the  same  quantity  of  labour  as  fifty 
pounds  worth  of  Scotch  pebbles  picked  up  on  the  sea  shore,  or  fifty  pounds 
worth  of  straw-plat." — Quarterly  Review,  Vol.  XXX.  p.  312. 

These  considerations  will  justify  the  student  in  withholding  his  assent 
from  this  flmdamental  proposition  of  our  author's,  and  in  regarding  it  as  a 
specimen  of  analysis  over-refined  for  practical  science. — E. 

*  Sir  William  Petty  had  stated,  so  early  as  1667,  that  the  value  of  com- 
modities is  always  regulated  by  the  quantity  of  labour  required  to  pro- 
duce them ;  but  there  is  the  same  difference  between  his  statenients  and 
the  analysis  and  investigations  of  Mr.  Ricardo,  whom  we  have  followed  iir 
this  section,  that  there  i?  between  the  conjectures  of  Pythagoras  respecting 


144  roLITICAI,  ECONOMY. 

j'rnfitg  and    Sect.  V. — Profits  and  Wages  vary  inversely — Accumulation  of 

Wages.  Capital  not  the  Cause  of  a  Fall  of  Profits — The  Increasing 

Sterility  of  the  Soil  shown  to  be  the  Chief  Cause  of  a  Rise  of 

JVages,  and  consequently  of  a  Fall  of  Pro/Its — Distinction  between 

Absolute  and  Proportional  Wages* 

Having  shown  in  the  previous  sections,  that  no  part  of  the 
produce  of  the  capital  last  applied  to  the  cultivation  of  the  land, 
and  which  regulates  the  price  of  all  the  rest,  goes  to  the  land- 
lord as  rent,  but  that  it  is  exclusively  divided  between  the  ca- 
pitalist and  the  labourer  ;  and  having  also  shown  that  a  rise  of 
wages  does  not  raise  the  value  of  commodities,  it  follows  neces- 
sarily and  directly  that  profits  must  vary  inversely  as  wages,  that 
is,  they  must  fall  as  wages  rise,  and  rise  as  wages  fall.  The  limits 
to  which  this  article  has  already  extended,  prevent  our  entering 
into  an  investigation  of  the  various  circumstances  which  deter- 
mine the  market  rate  of  wages.  It  is  sufficient  to  remark,  that 
it  can  never,  for  any  considerable  period,  fall  below  such  a  sum 
as  is  required  to  support  the  existing  labourers,  and  to  enable 
them  to  continue  their  race.  This  is  termed  by  Dr.  Smith  and 
Mr.  Ricardo  the  necessary  rate  of  wages,  and  forms  a  limit  below 
which  it  is  quite  impossible  they  can  be  permanently  reduced. 
But  as  the  subsistence  of  the  labourer  must  always  principally 

the  true  system  of  the  world  and  tlie  demonstrations  of  ^fewton.     The 
statement  of  Sir  William  Petty  is  however  curious,  and  we  subjoin  it: 

"  If,"  says  he,  "  a  man  can  bring  to  London  an  ounce  of  silver  out  of 
the  earth  in  Peru,  in  the  same  time  that  he  can  produce  a  bushel  of  corn, 
then  one  is  the  natural  price  of  the  other;  now,  if,  by  reason  of  new  and 
more  eajiie  mines,  a  man  can  get  two  ounces  (f  silver  as  easily  as  formerly  he 
did  one,  then  corn  will  be  as  cheap  at  10s.  the  bushel  as  it  %cas  before  at  5s. 
c(eteris  paribus.'" — Treatise  of  Taxes  and  Contributions,  ed.  1679,  p.  31. 

*  This  section  is  ably  written  and  ingeniously  argued, — it  is  one  of  those 
instances  of  original  inquiry  which  entitle  Ricardo  to  the  high  praise  of 
being  named  second  to  Adam  Smith  in  the  history  of  Political  Economy, 
as  an  improver  if  not  a  founder  of  the  science. 

On  this  subject  of  profits,  however,  there  is  an  apparent  want  of  can- 
dour on  the  part  of  the  new  school,  in  stating  the  opinions  of  Adam  Smith 
as  necessarily  at  variance  with  those  of  Ricardo ;  a  juster  light  in  which 
to  view  them  is,  as  imperfect,  not  false :  the  solution  given  bj'  Smith  is 
true,  tliough  it  stops  short  of  detecting  the  governing  principle,  which 
Ricardo  has  gone  on  to  analyze  with  equal  trutli  and  ingenuity.  The 
jiosition  of  Adam  Smith  is,  that  the  price  of  capital  or  rate  of  profits  is 
determined,  like  all  other  market  prices,  by  the  comparative  influence  of 
demand  and  supply.  This  position  is  demonstrably  true,  and  can  never 
be  superseded.  The  "  competition  of  capitalists,"  of  which  he  speaks, 
is  known  but  as  the  proximate  cause  of  the  fall  of  profits,  being  i^elf  an 
effect  of  the  accumulation  of  capital  outrunning  the  means  of  profitable 
investment.  Here  the  analysis  of  Adam  Smith  stops,  and  it  is  from  this 
that  Ricardo  sets  out, — that  fact,  with  Avhich  Adam  Smith  commences 
without  professing  to  explain,  Ricardo  has  unfolded  ;  and  shown,  not  tliat 
it  is  false,  but  that  it  is  necessarily  true,  the  diminished  means  of  profit- 
able investment  being  the  result  of  a  necessary  resort  in  the  progress  of  so- 
ciety to  inferior  soils.  Hence  it  appeajs  that  there  is  no  discrepancy  be- 
tween these  Avriters,  and  need  be  no  opposition  on  the  part  of  their  follow- 
ers. Adam  Smith  went  very  far  in  analyzing  the  phenomena  of  profits,  but 
Ricardo  has  gone  further,  and  carried  out  the  analysis  to  what  we  may  cuih 
sider  its  final  results. 

On  this  subject,  see  Wealth  of  JVations,  B.  I.  chap.  8,  9,  10.  Say,  B.  11. 
chap.  8.  sect.  2.  Ricardo,  Chap.  XXI.  Malthus,  Chap.  V.  sect.  1,  2,  3.  ami 
4;  in  the  latter  of  which  the  opinions  of  Ricardo  are  especially  examined. 
See  »lfo  review  of  Ricardo,  Edin.  Rev.  No.  59,  Art.  2. — /J. 


POLITICAL  ECONOMY,  145 

consist  of  raw  produce  ;  and  as,  owing  to  the  necessity  of  re-  Profits  and 
sorting  to  inferior*  soils  as  society  advances,  its  price  has  a  con-  ^^s^s- 
stant  tendency  to  rise,  the  necessary  rate  of  wages  must  have  the 
same  tendency.  Agreeably  to  this  theory,  therefore,  we  should 
expect,  that  in  all  newly  settled  countries,  and  where  none  but 
the  best  soils  are  cultivated,  profits  would  be  high  ;t  and  that  in 
all  old  settled  and  densely  peopled  countries,  and  where  soils  of 
a  very  inferior  quality  are  cultivated,  profits  would  be  compara- 
tively low — and  such  we  find  to  be  really  the  case. 

We  might  here  take  leave  of  this  part  of  our  subject  ;  but  as 
the  theory  we  have  deduced  from  the  conclusions  in  our  previous 
sections  is  very  different  from  the  common  one,  we  shall  endea- 
vour to  set  it  in  a  still  clearer  point  of  view. 

Dr.  Smith  was  of  opinion,  that  the  rate  of  profit  varied  in-  pp'n^on  of 
versely  as  the  amount  of  capital,  or,  in  other  words,  that  it  was  &c. """ 
always  greatest  where  capital  was  least  abundant  and  lowest 
where  capital  was  most  abundant.  He  supposed,  that,  ac- 
cording as  capital  increased,  the  principle  of  competition 
would  stimulate  capitalists  to  endeavour  to  encroach  on  the 
employments  of  each  other ;  and  that,  in  furtherance  of  their 
object  they  would  be  tempted  to  offer  their  goods  at  a  lower 
price,  and  to  give  higher  wages  to  their  workmen.  (^Wealth  of 
JVations,  Vol.  II.  p.  38.)  This  theory  was  long  universally  as- 
sented to.  It  has  been  espoused  by  MM.  Say,  Sismondi,  and 
Storch,  by  the  Marquis  Garnier,  and,  with  some  slight  modifica-  Error  of  this 
tions,  by  Mr.  Malthus.  But,  notwithstanding  the  deference  due  '""'""■ 
to  these  authorities,  it  is  easy  to  see  that  the  principle  of  competi- 
tion could  never  be  productive  of  a  general  fall  in  the  rate  of 
profit.  Competition  will  prevent  any  one  individual  from  ob- 
taining a  higher  rate  of  profit  than  his  neighbours  ;  but  no  one 
will  say  that  competition  diminishes  the  productiveness  of  {nchis- 
iry,  and  it  is  on  this  that  the  rate  of  profit  must  always  depend. 
The  fall  of  profits  which  invariably  takes  place,  as  society  ad- 
vances, and  population  becomes  denser,  is  not  owing  to  competi- 
tion, but  to  a  very  different  cause — to  a  diminution  of  thk 
POWER  to  employ  CAPITAL  WITH  ADVANTAGE,  resttlting  either 
from  a  decrease  in  the  fertility  of  the  soil,  which  must  be  taken  into 
cidiivationinthe  progress  of  society ,  or  from  an  increase  of  taxation. 

Mr.  Malthus  has  demonstrated,  that  population  has  a  constant  Tiie  Dccrea- 
tendency  not  only  to  equal,  but  to  exceed  the  means  of  subsis-  o"the  Soii"^ 
tence.j  But  if  the  supply  of  labourers  be  always  increased  in  the  Principal 
proportion  to  every  increase  in  .the  demand  for  their  labour,  it  is  faiiofProiits. 

*  In  the  original,  by  a  misprint,  this  reads  "  resorting  to  superior 
soils."— £. 

+  The  high  profits  of  young  and  fertile  countries,  is  strikingly  exempli- 
fied in  the  early  history  of  the  American  colonies.  In  1627,  the  Plymouth 
company  were  able  to  pay  thirty  per  cent,  on  borrowed  money.  The  year 
before  they  had  paid  forty-five  per  cent.  This,  however,  absorbed  their 
profits,  for  the  Governor,  speaking  of  it  with  the  piety  characteristic  of  the 
times,  says,  "  these  were  such  straits  that  it  was  God's  marvellous  Provi- 
dence that  we  were  enabled  to  wade  through  things."  Holmes's  Annals 
of  America,  1627.— -£. 

if  Our  author  uses  the  strong  term,  "demonstrated,"  in  reference  to  the 
great  work  of  Malthus  on  Population.  It  can  hardly  be  said  to  be  too 
strong,  since  it  is  a  work  which  has  settled  conclusively  and  finally,  the 


146  POLITICAL    ECONOMY. 

Profits  and  plain  the  mere  accumulation  of  capital  could  never  sink  profits 
^ses'  Yyy  raising  wages — that  is,  by  increasing  the  labotirer^s  share  of 
the  commodities  produced  by  him.  It  is  true,  a  sudden  increase 
of  capital  would,  by  causing  an  umisally  great  demand  for  la- 
bourers, raise  wages,  and  lower  profits  :  but  such  a  rise  of  wages 
could  not  be  permanent  ;  for  the  additional  stimulus  it  would  give 
to  the  principle  of  population  would,  as  Mr.  Malthus  has  shown, 
by  proportioning  the  supply  of  labour  to  the  increased  demand, 
infallibly  reduce  wages  to  their  former  level.  If,  therefore,  it 
were  possible  always  to  employ  additional  capital  in  the  rais- 
ing of  raw  produce,  in  the  manufacturing  of  that  raw  pro- 
duce when  raised,  and  in  the  conveying  of  the  raw  and  manu- 
factured products  from  place  to  place,  with  an  equal  return,  it  is 
evident,  supposing  taxation  to  continue  invariable,  that  no  con- 
ceivable increase  of  the  national  capital  could  occasion  the 
slightest  fall  in  the  rate  of  profit.  So  long  as  labour  is  obtain- 
able at  the  same  rate,  and  so  long  as  the  productive  power  of  that 
labour  is  not  diminished,  so  long  must  the  profits  of  stock  con- 
tinue unaffected.  Assuming,  then,  that  the  mere  increase  of 
capital  has  no  lasting  effect  on  wages,  it  must  obviously  be  the 
same  thing,  in  so  far  as  the  rate  of  profit  is  concerned,  whether 
ten  or  ten  thousand  millions  be  employed  in  the  cultivation  of 
the  soil,  in  the  manufactures  and  commerce  of  this,  or  any  other 

great  operating  principle  which  regulates  the  advance  of  national  popula- 
tion, and  the  policy  of  government  in  relation  to  it.  For  its  principles, 
with  which  every  student  of  Political  Economy  should  be  familiar,  refe- 
rence ought  to  be  had  to  the  work  itself.  For  an  examination  both  of  the 
work  and  the  objections  urged  against  it,  see  Edinburgh  Review,  Vol. 
XL.  and  XVI.  p.  464.  Quarterly  Review  of  Malthus,  Vol.  XVII.  p.  369, 
and  art.  7  of  No.  51.  See  also  North  American  Review,  of  Godwin's 
Reply  to  Malthus,  Vol.  XVI.  No.  37  ;  and  in  Vol.  XVII.  No.  41,  Everett's 
"  New  Ideas  on  Population." 

Among  the  principles  settled  on  this  subject,  tfie  student  may  adopt  the 
following  as  the  principal. 

1.  The  population  of  a  country  is  limited  by  the  means  of  support. 

2.  Population  is  forever  pressing  on  the  means  of  subsistence,  a  pressure 
arising  from  the  natural  rate  of  population  being  more  rapid  than  the  in- 
crease of  food. 

3.  Population  is  kept  down  to  the  means  of  subsistence  by  a  variety  of 
checks  which  may  be  reduced  to  two  classes. 

1.  Preventive,  being  the  check  of  prudence,  of  reason,  and  foresight. 

2.  Actual,  being  the  check  imposed  on  an  over  increase  by  vice,  misery, 
and  famine. 

The  policy  which  follows  from  these  principles,  goes  to  increase  popula- 
tion, not  by  bounties,  but  by  an  increased  supply  of  the  means  of  support. 
In  a  time  of  scarcity,  money  to  the  poor  but  shifts  starvation  from  the  ob- 
jects of  charity  to  an  equal  number  of  their  poorest  neighbours.  In  sucli 
a  case,  diminished  consumption  is  the  only  true  charity. 

In  judging  of  the  prosperity  of  a  country,  the  amount  of  population  af- 
fords no  criterion — but  the  rate  of  population  the  surest  and  best. 

The  population  of  a  country  may  be  either  pi'ogressive,  stationary,  or 
retrograde.  In  the  first  the  mass  of  the  people  are  comfortable  and  pros- 
porous — in  the  second  their  lot  is  tolerable — but  in  the  last  it  is  wretched. 

The  first  or  happiest  state  is  prolonged  by  whatever  delays  the  necessity 
of  resorting  to  inferior  soils  for  food — by  improvements  in  agriculture  at 
home,  and  free  admission  of  corn  from  abroad.  Hence  the  impolicy  of  the 
corn  laws  of  Great  Britain,  a  subject  which  will  be  hereafter  noticed. 
For  the  returns  of  the  population  of  the  United  States,  see  Seybert's  Sta- 
tistics; see  also,  note  on  overloaded  markets  in  this  article.  Part  IV. —  E. 


POLITICAL  ECONOMY.  14' 

kingdom  ;  provided  the  last  million  so  employed  be  as  produc-  Profita  ana 
live,  or  yields  as  large  a  return  as  the  first.  But  such  is  always  '^^^'" 
the  case  with  the  capital  employed  in  manufactures  and  com- 
merce. The  greatest  possible  amount  of  capital  and  labour 
may  be  employed  in  fitting  and  adapting  raw  produce  to  our  use, 
and  in  transporting  it  from  where  it  is  produced  to  where  it  is  to 
be  consumed,  without  a  diminished  return.  If  a  given  quantity 
of  labour  will  now  build  a  ship  of  a  given  burden,  or  construct 
a  machine  of  a  given  power,  it  is  certain  that  an  equal  quantity 
of  labour  will  at  any  future  period  be  able  to  build  a  similar  ship, 
or  to  coQstruct  a  similar  machine  ;  and  it  is  also  certain,  that  al- 
though these  ships  and  machines  were  indefinitely  increased, 
the  last  would  be  equally  well  adapted  for  every  useful  purpose, 
and  equally  serviceable  as  the  first.  The  probability,  indeed, 
or  rather,  we  should  say,  the  certainty  is,  that  the  last  would  be 
much  more  serviceable  than  the  first.  No  possible  limit  can  be 
assigned  to  the  powers  and  resources  of  genius,  to  the  improve- 
ment of  machinery,  and  of  the  skill  and  industry  of  the  labourer. 
Future  Watts,  Arkwrights,  and  Wedgewoods,  will  arise  ;  and  the 
stupendous  discoveries  of  the  last  and  present  age  will  doubtless 
be  equalled,  and  perhaps  surpassed,  in  those  which  are  to  come.* 
It  is,  therefore,  clear  to  demonstration,  that  if  equal  quantities 
of  capital  and  labour  could  always  raise  equal  quantities  of  rarv 
produce,  the  utmost  additions  to  the  capital  of  the  nation  could 
never  diminish  the  capacity  to  employ  that  capital  with  advan- 
tage, or  sink  the  rate  of  profit.  But  here,  and  here  only,  the 
bounty  of  Nature  is  limited,  and  she  deals  out  her  gifts  with  a 
frugal  and  parsimonious  hand. 

Pater  ipse  colendi 


Haud  facilem  esse  viam  voluit 1 

Equal  quantities  of  capital  and  labour  do  not  always  obtain 
equal  quantities  of  raw  produce.  In  raising  it,  man  has  to  con- 
tend with  constantly  increasing  difficulties.  The  soil  is  of  limited 
extent,  and  of  still  more  limited  fertility.  In  every  advancing 
country,  the  most  fertile  lands  are,  as,  we  have  already  seen, 
speedily  brought  under  cultivation,  and  recourse  must  then  be 
had  to  lands  of  a  less  degree  of  fertility,  or  which  yield  less  pro- 
duce in  return  for  the  same  expenditure.  It  is  this  limited  ferti- 
lity of  the  soil  that  is  the  real  cause  of  a  fall  of  profits.  It  is 
utterly  impossible  to  go  on  increasing  the  price  of  that  raw  pro- 
duce, which  forms  the  principal  part  of  the  subsistence  of  the 
labourer,  by  taking  inferior  soils  into  cultivation,  without  also 

*  On  the  power  and  influence  of  machinery,  see  Edinburgh  Review, 
No.  69,  art.  6.  On  its  improvements  in  modern  times,  see  Nortli  American 
Review,  No.  35.     On  Rail  Roads,  hj  T.  Tredgold,  London,  1825. 

The  names  of  Fulton,  Whitney,  and  Perkins,  may  be  added  to  those 
given  by  our  author,  to  remind  the  American  reader  that  his  countrymen 
are  not  behindhand  in  their  contributions  to  this  common  stock,  and  to 
arouse  to  emulation,  the  talent  and  ingenuity  of  our  country,  by  recalling 
to  memory  the  excellence  of  its  first  (ruits.  On  this  subject,  see  also  a 
very  able  and  interesting  Review  on  Canals  and  Rail  Roads.  Quarterlv, 
No.  62,  art.  b.—E. 

i  By  Jove's  decree,  man  eats  in  sweat  and  toil, 
The  hard  earned  fruits  of  nature's  churlish  soil. 

Georgics,  Book  I.,  1.  IW^. 


148  POLITICAL    ECOIifOMY. 

yv^T *"^  increasing  his  wages.  A  rise  of  wages  is  seldom  or  never  ex- 
'^^^'  actly  coincident  with  a  rise  in  the  price  of  necessaries,  but  they 
can  never  be  very  far  separated.  The  price  of  the  necessaries 
of  life  is,  in  fact,  the  cost  of  producing  labour.  The  labourer 
cannot  work  if  he  is  not  supplied  with  the  means  of  subsistence. 
And  although  a  certain  period  of  varying  extent,  according  to 
the  circumstances  of  the  country  at  the  time,  must  always  elapse, 
when  necessaries  are  rising  in  price,  before  wages  can  be  pro- 
portionably  augmented,  there  can  be  no  question  but  that,  in  the 
end,  such  an  augmentation  will  be  brought  about.  Now,  as  rent 
is  nothing  but  the  excess,  or  the  value  of  the  excess,  of  the  pro- 
duce obtained  from  the  best  above  that  obtained  from  the  very 
worst  soils  in  cultivation,  it  is  plain  it  does  not  enter  into  the  cost 
of  production,  and  can  have  no  influence  whatever  on  prices. 
Still  better  to  elucidate  this  fundamental  principle,  let  us  sup- 
pose that  an  individual  has  two  loaves  on  his  table  ;  one  raised 
on  very  fertile  land,  the  other  on  the  very  worst  land  in  cultiva- 
tion :  in  the  latter,  there  will  be  no  rent,  and  it  will  be  wholly 
divided  between  wages  and  profits.  We  have  already  shown 
that  it  is  the  cost  of  producing  this  loaf  which  will  regulate  the 
price  of  all  other  loaves  ;  and  although  it  will  be  true  that  the 
rent  which  the  loaf  raised  on  the  best  land  will  afford  will  be 
equal  to  all  the  difference  between  the  expense  of  growing  the 
corn  of  which  it  is  made,  and  the  corn  raised  on  the  worst  lands 
of  which  the  standard  loaf  is  made,  yet  it  is  only  in  consequence 
of  this  difference  that  any  rent  whatever  is  paid.  Twenty  dif- 
ferent loaves,  all  selling  for  the  same  price,  may  yield  different 
portions  of  rent ;  but  it  is  one  only,  that  which  yields  no  rent, 
which  regulates  the  value  of  the  rest,  and  which  is  to  be  con- 
sidered as  the  standard.  It  is  demonstrable,  therefore,  that  rent 
does  not  enter  into  price.  Wages,  and  profits  make  up  the 
whole  value  of  every  commodity.  And,  therefore,  when  wages 
rise,  profits  must  fall  ;  and  when  wages  fall,  profits  must  rise. 
But  we  have  shown  that  there  is  never  any  falling  off,  but  n 
constant  increase,  in  the  productiveness  of  the  labour  em- 
ploj'ed  in  manufacturing  and  preparing  raw  produce.  And 
such  being  the  case,  it  is  demonstrably  certain,  that  the  sub- ' 
sistence  of  the  labourer  could  never  be  increased  in  price, 
and  consequently  that  no  additions  could  ever  be  made  to  his 
necessary  wages,  were  it  not  for  the  diminished  power  of  agri- 
cultural labour,  originating  in  the  inevitable  necessity  under 
which  we  are  placed,  of  resorting  to  poorer  soils  to  obtain  raw 
produce  as  society  advances.  The  constantly  decreasing  fertility 
of  the  soil  is,  therefore,  at  bottom,  the  great  and  permanent  cause 
of  a  fall  of  profits.  Profits  would  never  fall  if  wages  were  not 
increased  ;  and,  supposing  taxation  to  continue  invariable,  wages 
would  never  be  increased  were  it  not  for  the  decreasing  fertilit}'^ 
of  the  soil,  and  the  consequent  increase  of  the  labour  necessary 
to  obtain  corn  and  other  raw  products. 

*'  With  a  permanently  high  price  of  corn,"  says  Mr.  Ricardo, 
"■  caused  by  increased  labour  on  the  land,  wages,  would  be  high  ; 
and,  as  commodities  would  not  rise  on  account  of  the  rise  of 
wages,  profits  would  necessarily  fall.  If  goods  worth  L.  1000 
Tcqiiire  at  one  time  labour  which  cost  L.  800,  and  at  another 


rOLITlCAL  ECONOMY.  149 

tiuie  the  price  ot"  the  same  quantity  of  labour  is  raised  to  L.  900,  Profita  and 
profits  will  fall  from  200  to  L.  100.     Profits  would  not  fall  in^^'S"- 
one  trade  only,  but  in  all.     High  wages  equally  aflect  the  profits 
of  the   farmer,  the  manufacturer,  and  the  merchant.      There 
is  no   other  way  of  keeping  profits   up  but  by  keeping  wages 
down." — (On  Protection  to  Agriculture ^  p.  43.) 

It  is  necessary,  however,  to  observe,  that  although  profits  de-  ^'^nd  on*^' 
pend  on  wages,  they  do  not  depend  on  wages  estimated  in  money,  Proportional 
in  corn,  or  any  other  commodity,  but  on  pkoportional  wages  ^^'"='^'*- 
that  is,  on  the  share  of  the  commodities  produced  by  the  labourer, 
or  of  their  value,  which  is  given  to  him.  It  is,  indeed,  easv  to  see 
that  proportional  wages  may  be  increased,  at  the  same  lime  that 
wages,  if  estimated  in  corn,  or  any  other  necessary,  would  be 
found  to  be  diminished  ;  and,  in  point  of  fact,  such  is  almost 
uniformly  found  to  be  the  case  when  recourse  is  had  to  poor 
soils.  Suppose  that  the  produce  obtained  from  a  given  amount 
of  capital  applied  to  the  land  last  taken  into  cultivation  in  Ameri- 
ca yields  100  quarters,  the  labourer  will  perhaps  receive  60 
quarters,  or  QO per  cent,  of  the  produce  as  his  wages.  But  the 
same  amount  of  capital,  if  applied  to  the  land  last  taken  into  cul- 
tivation in  Britain,  would  not  yield  more  than  50  quarters  ;  and 
supposing  the  labourer  to  get  only  40  quarters,  or  20  quarters  less 
than  in  America,  still  his  proportional  wages,  or  the  wages  which 
determine  the  rate  of  profit,  would  be  80  percent,  or  20  per  cent. 
higher  than  in  America.*     In  the  early  stages  of  society,  and 

*  This  shows  the  propriety,  as  already  stated  in  a  previous  note,  of  con- 
fining the  term,  "  real  wages,"  to  the  amount  of  value  received  by  the  la- 
bourer, since  it  would  be  absurd  to  talk  of  the  real  wages  of  labour  in 
England  being  higher  than  in  America.  What  the  labourer  wants  is  sup- 
port for  himself  and  family,  that  alone  to  him  is  "  real" — the  proportion 
which  such  provision  takes  of  the  fruits  of  his  labour,  is  a  matter  of  con- 
sideration to  his  employer,  not  to  him.  To  him,  wages  are  low  when  they 
fail  to  support  him,  and  high  when  there  is  a  surplus  for  accumulation. 
This  consideration  tends  somewhat  to  diminish  the  value  of  the  novel  prin- 
ciple laid  down  by  Ricardo,  viz.,  that  of  the  inverse  ratio  of  wages  and  pro- 
fits, and  to  explain  further  the  otherwise  anomalous  fact  of  high  wages  and 
high  profits  existing  together,  as  they  unquestionably  do  in  this  country. 

The  wages  and  profits  to  which  Ricardo's  principle  is  confined,  are  com- 
paraiive  wages  and  comparative  profits,  or,  in  other  words,  the  rate  of  divi- 
sion between  the  labourer  and  the  capitalist.  This  prii.-ciple,  thouo-h  ;i 
sound  and  valuable  one,  has  not  that  wide  bearing  which  at  first  sight  it, 
appears  to  have,  for  it  cannot  decide  the  question  of  real  wages  and  re;i! 
profits,  upon  which  alone  the  comforts  of  the  labourer  and  the  accumula- 
tion of  the  capitalist  depend.  To  illustrate  this  position,  the  following  cases 
may  be  stated  as  irreconcileable  to  tlie  language  of  Ricardo  and  of  our 
author,  if  it  be  interpreted  of  real  wages  and  real  profits. 

1.  Both  wages  and  profits  may  be  high  at  the  same  time  and  in  the  same 
business,  as  is  exemplified  in  the  United  States,  where  the  capitalist  soon 
grows  wealthy,  and  the  labourer  whom  he  employs  soon  grows  independent. 

2.  Both  wages  and  profits  may  be  low,  the  capitalist  may  be  growing 
poor  and  the  labourer  scarce  maintain  himself.  This  is  the  case  whenever 
trade  and  manufactures  are  on  the  decline. 

3.  Profits  may  rise  and  wages  not  fall,  as  where  new  markets,  or  an  in- 
creased demand  have  elevated  the  market  price  ;  the  reverse  of  which 
circumstances,  would  produce  the  opposite  result,  viz.,  profits  would  fall 
and  wages  not  rise. 

4.  Wages  may  rise  and  profits  not  fall,  for  it  may  be  the  direct  conse- 
quence of  a  previous  rise  in  the  price  of  the  commodity ;  the  converse  of 
which  proposition  is  also  true,  wages  may  fall  and  profits  not  rise,  which 
is  the  natural  consequence  of  a  continued  slack  market. 

IP 


ioO  rOLITICAL    KCONOMV". 

Profits  and  whercvei'  the  best  lands  only  are  cultivated,  proportional  wage?' 
Wages.  gj,g  always  low,  and  profits  high  ;  hut  these  low  proportional 
wages  are  always  the  most  advantageous  to  the  labourer,  be- 
cause, as  labour  is,  in  such  circumstances,  extremely  productive. 
a  small  per-centage  of  ils  total  amount  gives  a  large  supply  of 
necessaries  and  conveniences.  In  the  advanced  stages  of  society, 
on  the  other  hand,  and  wherever  lands  of  a  very  inferior  de- 
gree of  fertility  are  cultivated,  proportional  wages  are  high  and 
profits  low  ;  but  owing  to  the  increased  difiiculty  of  production, 
these  high  proportional  wages  afford  only  a  comparatively  small 
supply  of  necessaries  and  conveniences. 

It  is  therefore  on  proportional  wages  that  profits  must  always 
depend  ;  and  owing  to  the  increasing  difficulty  of  producing 
corn  and  other  products,  such  proportional  wages  always  increase 
as  society  advances.  This  natural  tendency  of  profits  to  fall  is 
occasionally  checked  by  improvements  in  machinery,  and  by 
discoveries  in  agriculture  ;  but  the  effects  of  these  improvements 
are  only  temporary  ;  for,  by  stimulating  population,  they  never 
fail,  in  the  long  run,  to  force  recourse  to  poor  soils  ;  and  when- 
ever this  is  the  case,  profits  must  unavoidably  fall. 

It  has  been  contended,  that  both  wages  and  profits  are  high  in 
America,  and  that,  therefore,  the  theory  which  we  now  have 
been  endeavouring  to  explain,  and  which  makes  profits  in  every 
case  to  depend  on  wages,  must  be  erroneous.  But  the  remarks 
we  have  just  made  show  that  this  objection  is  totally  unfounded. 
It  is  by  proportional  quantities,  and  not  by  absolute  quantities, 
that  we  are  to  estimate  the  effect  of  wages  on  profits.  The 
American  labourer  receives  a  less  proportion  of  the  produce 
raised  b}'^  him  than  the  British  labourer,  ana  profits  are  conse- 
quently high  in  America  ;  but  as  the  American  labourer  culti- 
vates none  but  the  best  soils,  and  which  yield  a  very  large  pro- 
duce, his  smaller  share  of  this  large  aggregate  produce  gives  him 
a  great  absolute  quantity  of  necessaries  and  conveniences,  and 
his  condition  is,  therefore,  comparatively  prosperous.* 
An  Increase  We  have,  throughout  this  discussion,  been  supposing  taxation 
RedmTes''""  to  be  invariable.  It  is  plain,  however,  that  as  soon  as  it  is  in- 
Profif.  creased,  it  must  have  one  or  other  of  two  effects — it  must  either 
lower  the  labourer's  command  over  necessaries  and  luxuries. 

All  these  cases  are  incons^istent  with  the  general  rule  of  Ricardo,  that  a 
rise  of  wages  is  equivalent  to  a  fall  of  profits,  and  a  fall  of  wages  to  a  rise 
of  profits.  The  only  other  case  that  remains,  and  in  which  alone  the  posi- 
tion is  true,  is  when  the  price  of  the  commodity  continues  stationary, 
while  wages  vary  ;  a  state  of  things  so  far  from  being  the  common  one,  as 
greatly  to  lessen  the  value  of  a  principle  which  is  thus  limited  in  its  appli- 
cation.— E. 

*  If  by  "  comparatively,''  our  author  here  means  as  placed  in  comparisou 
with  the  British  labourer,  who  receives  a  larger  proportion  of  the  fruits 
of  labour,  it  produces  the  awkward  inconsistency  of  making  superior  pros- 
perity the  accompaniment  of  lower  wages.  Our  author  does  not  seem  to 
perceive  that  the  profits,  about  which  he  reasons,  are  "  comparative,"  as 
well  as  the  wages  ;  real  profits  being  governed,  not  so  much  by  the  propor- 
tion paid  to  labour,  as  by  the  means  of  profitable  investment. 

Profits  are  really  high  when  the  returns  form  a  high  percentage  on  the 
capital  employed,  just  as  wages  are  really  high  when  theyafford  a  surplus 
after  supporting  the  labourer  and  his  family.  The  capitalist  may  groAv 
poor  upon  high  proportional  profits,  and  the  labourer  may  starve  upon  high 
proportional  wages ;  so  that  individual  comfort  and  national  accumulation. 


POLITICAL    ECONOMV.  151 

.iiid  degrade  his  condition,  or  it  must  fall  on  profits.  There  are  Profns  and 
limits,  however,  and  those  not  very  difficult  to  be  attained,  to  the  ^"S'^'' 
power  oi"  the  labourers  to  pay  taxes  ;  and  whenever  these  limits 
have  been  reached,  they  must  entirely  fall  on  profits.  It  has, 
therefore,  been  most  justly  and  truly  observed  by  Dr.  Smith, 
that  a  heavy  taxation  has  exactly  the  same  effects  as  an  increased 
barrenness  of  the  soil,  and  an  increased  inclemency  of  the 
heavens.* 

The  great  wealth  and  commercial  prosperity  of  Holland  has  Errors  of  air 
been  confidently  appealed  to  by  Sir  Josiah  Child,  and  others,  as  dV.  Smith"' 
a  convincing  proof  of  the  superior  advantages  of  low  profits  and  with  reepe*  t, 

•    .  1  1  r  1     1  T-v       r,     •  1  ,        to  the  Low 

interest ;  and  seems  also  to  have  led  Dr.  Smith  to  suppose  that  RatcofPro 
the  mere  accumulation  of  capital  could  sink  the  rate  of  profit,  fi'"'"""""'^'- 
But  in  this  instance,  there  can  be  no  doubt  that  Sir  Josiah  Child 
mistook  the  eff'ect  of  heavy  taxation  for  the  cause  of  wealth,  and 
that  Dr.  Smith  mistook  the  same  effect  for  the  eff'ect  of  the  accu- 
mulation of  capital.  A  country,  whose  average  rate  of  profit  is 
considerably  less  than  the  average  rate  of  profit  in  surrounding 
countries,  may,  notwithstanding,  abound  in  wealth,  and  be  pos- 
sessed of  immense  capital ;  but  it  is  the  height  of  error  to  sup- 
pose, that  this  lowness  of  profit  could  have  facilitated  their  ac- 
cumulation. There  is  unquestionable  evidence  to  show  that  the 
capital  of  Holland  had  been  chiefly  amassed  when  profits  were 
comparatively  high  ;  and  that  the  subsequent  fall  of  profits  was 
almost  entirely  a  consequence  of  the  oppressiveness  of  taxation,! 
and  the  continued  increase  of  the  public  debt.  In  1580,  the 
interest  of  the  public  debt  of  the  province  of  Holland  amounted 
to  1 17,000  florins,  but  so  rapidl}'  did  it  increase,  that  in  1665,  du- 
ring the  administration  of  the  famous  John  de  Witt,  the  states 
were  compelled  to  reduce  the  interest  of  the  debt  from  5  to  4 
per  cent.  ;  and  yet,  notwithstanding  this  reduction,  it  amounted, 
in  1678,  to  7,107,128  florins!  (Metelerkamp,  Statistique  de  la 
Hollande,  p.  203.)  It  was  this  enormous  increase  of  the  public 
debt,  and  the  proportionable  increase  of  taxation  which  it  oc- 
casioned, and  not  the  accumulation  of  capital,  that  was  the  real 
and  sole  cause  of  the  fall  of  profits  in  Holland,  and  ultimately  of 
her  decline  and  ruin.  Sir  William  Temple,  in  his  Observations 
on  the  United  Provinces,  mentions  that  the  trade  of  Holland  was 
on  the  decline  in  1668,  the  period  when  Sir  Josiah  Child's  Trea- 

Ihe  two  great  points  of  inquiry  to  an  economist,  stand,  the  latter  altogether 
unaffected,  and  the  former  but  slightly  influenced  by  this  proportionate  es- 
timate. On  the  principle,  see  Malthus,  ch.  5,  sect.  1  and  2.  On  the  fact 
or  state  of  the  labouring  classes  in  England  with  these  high  proportional 
wages,  see  Report  of  Select  Committee  ;  Quarterly  Review.  Vol.  XVIII. 
XXVIII. ;  Edinburgh  Review,  Vol.  XLI.  p  229.— E. 

*  This  strong  but  just  illustration,  shows  the  duty  of  limiting  taxation 
to  the  smallest  possible  amount  consistent  with  the  exigencies  of  govern- 
ment, and  of  exercising  the  strictest  economy  in  its  disbursement.  A  need- 
less tax,  or  one  which  is  the  result  of  needless  expenditure,  is  equivalent, 
in  proportion  to  its  amount,  to  the  natural  calamities  of  a  drought  or  a 
famine,  and  sl'ould  be  equally  dreaded  by  a  wise  and  benevolent  politician. 
This  subject  will,  however,  come  more  in  place  under  the  next  section 
which  treats  of  public  consumption. — E. 

t  Taxation  in  Holland  had  proceeded  to  its  maximum,  which  may  be 
calculated  at  about  one  third  of  the  national  income.  It  was  a  common 
saying  among  the  Dutch,  that  a  dish  of  fish  was  paid  "  once  to  the  fisher- 
men and  six  times  to  the  State." — E. 


]  :r2 


rOLITICAL    ECONOMY. 


Profits  and 


I,o\v  Profits 
rause  the 
Transfer  of 
Capital  to 
olJier  Coun- 


tise  was  first  published  ;  and  he  further  states,  that  the  vast  capi- 
tals of  the  Dutch  merchants  had  been  chiefly  accumulated  pre- 
viously to  the  war  in  which  the  Republic  had  been  engaged  with 
Cromwell  and  Charles  11.,  and  when,  of  course,  taxation  was 
much  lighter,  and  the  rate  of  profits  much  higher  than  at  any 
subsequent  period.* 

Higii  proportional  wages  and  low  profits,  for  they  are  insepa- 
rably connected,  ought  never  to  be  made  the  subject  of  com- 
plaint, if  they  occur  in  the  natural  progress  of  society,  under  a 
parsimonious  government,  and  a  system  of  perfectly  free  inter- 
course with  other  countries.  But  if  they  are  the  result  of  heavy 
taxation  caused  by  profuse  expenditure,  or  by  restrictions  which 
prevent  the  importation  of  cheap  foreign  corn,!  and  which,  there- 

*  For  an  account  of  the  effect  of  heavy  taxes  on  the  industry  of  Hol- 
land, see  the  second  volume  of  the  Traitt  de  la  Richesse  de  la  Hollandc,  pp. 
39  and  179  ;  and  a  memoir  On  the  Means  of  Redresshig  and. 4m ending  the 
Trade  of  the  Republic^  drawn  up  from  inlormation  communicated  by  the 
best  informed  merchants,  and  published  by  order  of  the  Stadtholder,  Wil- 
liam IV.  Prince  of  Orange,  in  1751.  This  memoir  was  translated  into 
English,  and  published  in  London  in  the  same  year. 

t  The  impolicy  of  the  corn  laws  of  England  is  no  longer  a  disputed 
question  ;  the  only  difficult}'  lies  in  returning  to  the  free  and  natural  course 
of  things  with  the  least  injury  to  that  class  of  men  whose  interests  have 
been  based  upon  these  injudicious  restrictions.  How  sensibly  it  is  now  fell 
to  be  the  interests  of  a  monopoly  and  not  of  the  nation  which  are  invol- 
ved in  tlicir  support,  may  be  judged  from  the  numerous  petitions  for  their 
repeal  which  have  recently  come  before  Parliament.  For  the  argument*- 
urged,  and  the  modifications  proposed,  see  the  recent  speeches  of  Mr. 
ITuskisson  on  the  question,  May,  1825. 

The  general  principles  of  the  science  are  all  in  opposition  to  them.  The 
arguments  in  favour  oi'  corn  laws,  or  rather  the  objects  which  they  have 
in  view,  are  two  fold. 

1.  National  security,  by  growing  at  Jiomc  the  means  of  subsistence,  and 
encov.raging  importation  when  threatened  with  a  scarcity. 

2.  The  security  and  benefit  of  the  landed  interest,  by  keeping  corn  at  a 
medium  price,  encouraging  exportation  whcii  low,  and  importation  when 
high,  and  preventing  foreign  competition,  except  when  the  national  interest 
imperatively  requires  it,  as  in  the  case  of  a  short  crop  and  threatened 
scarcity — a  state  of  things  always  marked  by  a  great  advance  of  price. 

The  first  of  these  arguments  may  be  answered  both  by  fact  and  reason- 
ing. No  countries  in  Europe  have  so  often  suffered  by  famine  as  those 
which  have  adopted  these  securities  against  it,  for  instance,  Italy  and 
Spain.  Those  who  have  money  are  never  found  to  want  corn,  whether  it 
be  raised  at  home  or  abroad.  The  general  reasoning  which  bears  against 
this  point,  explains  clearly  why  this  must  be  so.  The  corn  laws  narrow 
the  calculations  of  the  producer  to  the  supply  of  the  home  maiket ;  within 
this  he  seeks  to  limit  himself,  and  a  scant  crop  must  be  the  frequent  con- 
*equence  ;  but  give  him  an  unlimited  maiket,  and  an  unlimited  supplv 
will  be  the  result — unlimited  except  by  those  general  laws  on  wJiich  de- 
pends the  advancement  of  wealth — the  comparative  cost  of  production  at 
home  and  abroad. 

In  relation  to  the  second  argument  advanced  in  favour  of  the  corn  laws, 
it  may  be  observed  that  neither  have  they  attained  the  object  proposed, 
nor  if  they  could  attain  it,  ought  partial  interests  ever  to  be  made  tlie  aim 
of  national  regulations. 

They  have  secured  a  limited  monopoly,  but  not  steady  prices,  to  the 
growers  of  corn,  since  the  range  of  price  from  the  miniiiTum  at  which 
exportation  is  permitted,  to  the  maximum  at  which  the  ports  are  open, 
comprehends  a  greater  range  than  could  possibly  exist  under  a  free  trade. 
"  Open  tlie  flood  gates,"  to  use  the  illustration  of  Adam  Smith,  "  and  it 
will  soon  come  to  a  level,"  the  ))ermanency  of  which,  will  be  more  to  the 
interest  of  the  agriculturist  than  the  doubtful  monopolv  whicli  he  now 
'■niovs. 


I'OLITICAL   ECONOMY.  loo 

lore,  force  the  cultivation  of  inferior  soils  at  home,  they  cannot  Profits  and 
be  too  strongly  condemned.  A  nation  placed  in  such  circum-  ^^  ""^^' 
stances  must  not  only  advance  slowly,  when  compared  with  other 
nations  which  are  enabled  to  raise  their  supplies  of  raw  produce 
from  superior  soils — the  power  to  accumulate  capital  must  not 
only  be  diminished,  but  a  strong  temptation  must  be  held  out  to 
transfer  it  to  other  countries.  The  love  of  country — the  thou- 
sand ties  of  society  and  friendship — the  ignorance  of  foreign  lan- 
guages, and  the  desire  to  have  one's  stock  employed  under  their 
own  inspection,  will,  no  doubt,  in  very  many  instances,  induce 
capitalists  to  rest  contented  with  a  less  rate  of  profit  in  their  own, 
than  they  might  realize  by  investing  their  funds  in  other  coun- 
tries. But  this  love  of  country  has  its  limits.  The  /ore  of  gain 
— the  au7-i  sacra  fames — is  a  no  less  p^  verful  and  constantly  ope- 
rating principle  ;  and  if  capitalists  ii.  .  once  assured  that  their 
stock  can  be  laid  out  with  equal  security,  and  with  considerable- 
greater  advantage  in  foreign  states,  an  efflux  of  capital  to  a 
greater  or  less  extent  will  unquestionably  take  place. 

A  manufacturing  and  commercial  country,  which  has  wisely 
adopted  a  liberal  commercial  system,  has  no  reason  to  be  alarmed 
at  the  effects  of  competition  in  any  department  of  industry.  The 
production  of  one  commodity  opens  a  market  for  the  exchange, 
that  is  for  the  sale  of  some  other  com.modity.  What  a  manu- 
facturing and  commercial  nation  has  really  to  fear  is,  that  its 
average  rate  of  profit  should  fall  lower  than  the  average  rate  of 
])roiit  in  the  neighbouring  counties.  If  this  should  be. the  case. 
its  progress  will,  in  consequence,  be  retarded  ;  and  it  will  ulti- 
mately languish  and  decline.  Neither  the  skill,  industry,  and 
perseverance  of  artizans,  nor  the  most  improved  and  powerful 
machinery,  can  permanently  withstand  the  paralyzing  and  dead- 
ening influence  of  a  comparatively  low  rate  of  profit.  And  such 
a  comparative  reduction,  it  must  never  be  forgotten,  will  be  con- 
stantly produced  by  a  comparatively  heavy  taxation,  and  by  actios 

But  even  supposing  his  interests  "ivere  secured  by  these  provisions,  it 
•would  be,  on  the  part  of  the  government,  a  narrow  and  unwise  policv. 
in  the  truest  sense  of  the  term,  he  is  the  grower  of  corn  who  furnishes  it  to 
the  country ;  and  he  is  the  most  profitable  grower  of  corn  who  furnishes  it  al 
the  cheapest  rate.  Whether  he  raise  it  in  the  vale  of  Gloucester,  or  on 
the  fiats  of  the  Genesee,  is  to  the  nation  a  matter  of  utter  indifference  ; 
nor  do  the  chances  of  navigation  and  foreign  wars,  to  which  the  one  is 
subjected,  constitute  a  greater  risk  than  the  drought,  and  the  frost,  and 
the  fly,  to  which  the  other  is  exposed.  He  who  sits  at  home,  therefore, 
and  manufactures  wool  or  iron,  is  raising  corn  for  the  nation  as  surely,  and 
perliaps  more  profitably,  than  he  who  is  labouring  in  the  field. 

The  difficulties  with  which  the  English  government  now  feel  themselves 
involved,  in  relation  to  this  subject,  arise  not  from  principle  but  expedi- 
ency, from  the  whole  system  of  their  agriculture  and  the  various  interests 
connected  with  it  being  based  upon  these  laws ;  difficulties  which  mav 
serve  as  a  warning  to  our  country,  how  we  hastily  enter  on  an  artificial 
and  restrictive  system  wliich  hereafter  cannot  be  abandoned  but  at  the  risk 
of  great  injustice  and  a  breach  of  national  good  faith. 

For  more  detailed  views  of  this  subject,  let  the  student  consult  the  ar- 
ticle in  the  supplement  to  the  Encyclopedia  Britannica.  entitled  Coi-n  Tradt 
and  Laws.  To  this  article  Mr.  Ricardo  before  his  death,  gave  the  stamp 
of  his  approbation  ;  "  it  shows,"  said  he,  "•  that  the  author  is  completelv 
inaster  of  the  subject."  See  also  Adam  Smith,  Book  IV.  ch.  5:  Malthus, 
on  the  Corn  Laws,  reviewed  in  the  Edinburgh  Review,  No.  48,  art.  13; 
also.  Vol.  XLI.  p.  55  ;  also.  No.  'A.  art.  ')  :  nl=o.  Quarterlv  Review,  Vol. 
XXX.  p.  486.— ;v.  '  " 


154  I'OLITICAL    ECONOMY. 

Consump-     on  di  factitious  and  exclusive  convmercial  system  ;*  for,  by  prevent- 
WpaUfi.       ing  the  importation  of  cheap  foreign  corn,  we  necessarily  forct 

the  cultivation  of  poor  soils,  and  ihvs  by  raising  pj'oportional  rcrr- 

ges  sink  proiits. 


PART  IV. 

CONSUMPTION  OP  WEALTH. 

Having  in  the  previous  sections  endeavoured  to  explain  the 
means  by  which  labour  is  facilitated,  and  wealth  produced,  and 
to  investigate  the  laws  re'-ilating  its  distribution  among  the  va- 
rious classes  of  the  socie^ffe.'we  come  now  to  the  third  and  last 
division  of  the  science  of  Political  Economy,  or  to  that  which 
treats  of  the  Consumption  of  Wealth,  j 

*  Among  tlie  great  moral  revolutions  of  sentiment  which  the  course  of 
the  last  fifty  years  has  produced,  there  is  none  more  marked  than  the  open 
abandonment  on  the  part  of  English  statesmen,  of  the  principles  of  that 
narrow  exclusive  policy  by  which  they  have  so  long  been  bound.  It  is  one 
of  the  victories  over  prejudice  and  error,  for  which  we  are  indebted  to  Po- 
litical Economy,  and  is  to  be  received  as  an  earnest  of  what  that  science 
will  one  day  effect  in  the  regeneration  of  government,  and  in  advancing 
the  great  interests  of  humanity,  by  constituting  peace  and  mutual  interna- 
tional benefits  as  the  great  pillars  of  national  prosperity. 

That  this  change  of  the  language  and  system  of  England  is  a  mere  po- 
litic compliance  with  the  peculiar  relations  in  which  she  now  stands  to 
other  countries,  and  that  her  present  greatness  has  arisen  from  the  opposite 
course,  is  an  illiberal  and  false  suspicion ;  for  there  is  no  period  of  her  his- 
tory in  which  the  same  arguments  in  favour  of  the  liberal  system  would 
not  have  been  equally  conclusive,  in  which  free  labour,  open  capital,  unre- 
stricted enterprise,  and  unshackled  commerce,  would  not  have  been  equallv 
to  the  credit  of  her  sagacity,  and  the  mcrease  of  her  national  wealth. 

Let  not  us  then  copy  her  early  errors  and  late  repentance,  but  strike  in 
at  once  upon  the  course  of  improvement,  with  all  the  lights  of  modern 
science.  h\  this,  indeed,  consists  the  peculiar  felicity  of  our  situation  as 
Americans,  that  we  are  an  old  people  operating  upon  the  resources  of  a 
new  country,  having  in  our  constitution  the  wisdom  of  age  and  the  energy 
()f  youth,  and  rather  starting  into  manhood  than  growing  into  it  through 
the  slow  advances  by  which  the  nations  of  the  old  world  have  past,  of  fee- 
bleness, and  ignorance,  and  inexperience. 

On  this  subject  see  recent  speeches  in  Parliament,  by  Mr.  Canning  and 
Mr.  Huskisson,  who  speak  the  language  of  the  Cabinet,  more  especially 
the  latter,  whose  situation  at  the  head  of  the  Board  of  Trade  gives  pecu- 
liar weight  both  to  his  opinions  and  his  acknowledgments.  Yet  these  are 
sentiments  which  less  than  a  century  ago,  viz.  in  1723,  when  uttered  by  a 
Minister  in  the  House  of  Commons,  were  cried  down  as  treason  against  the 
majesty  of  England,  and  a  rebellion  was  the  threatened  result  of  their  appli- 
cation. The  wise,  but  bold  measure,  that  was  thus  threatened,  was  that 
of  making  "  London  a  free  port,  and  by  consequence  the  market  of  the 
World," — a  proposal  due  to  the  sagacity  of  Sir  R.  Walpole,  a  minister, 
who  alike  honoured  and  disgraced  tlie  premiership,  by  his  worldly  wisdom 
and  his  personal  vices.  See  speech  on  the  bitroduction  of  Excise  Scheme, 
Coxa's  Life,  Vol.  I.  p.  372.  See  also  M'CuUoch's  Introduction,  where  it  is 
quoted. — E. 

t  In  the  sentiments  contained  generally  in  the  following  section,  the  Edi- 
tor thinks  there  will  be,  in  this  country,  little  difference  of  opinion.  The 
arguments,  however,  in  favour  of  Adam  Smith's  principle  will  be  fairly 
stated.  On  the  subject  of  gluts  there  will  exist  some  doubt, — it  is  a  ques- 
tion of  so  intricate  a  nature,  that  even  in  the  best  writers  it  is  involved  in 
muoh  ob?cijrity.    The  consumption  of  government  is  treated  too  succinctly 


POLITICAL    ECONOMY. 


155 


Definition  of  Consumption— Consumption  the  end  of  Production  (j^^'^J"?" 
— Test  of  Advantageous  and  Disadvantageous  Consumption —  Wcaitiv. 
Error  of  Dr.  Smith's   Opinions   with  respect   to    Unproductive 
Consumption — Error  of  those    who   contend,  that  to  facilitate 
Production  it  is  necessary  to  encourage  Consumption — Cause  of 
Qluts — Consumption  of  Government — Conclusion. 

We  formerly  showed,  that,  by  the  production  of  a  commodity  O'^^njJ^f" 
was  not  meant  the  production  of  matter,  for  that  is  exclusively  sumption. 
the  prerogative  of  Omnipotence,  but  the  giving  to  matter  already 
in  existence  such  a  shape  as  might  fit  it  for  ministering  to  our 
wants  and  enjoyments.*  In  like  manner,  by  consumption  is  not 
meant  the  consumption,  or  annihilation  of  matter,  lor  that  is 
equally  impossible  as  its  creation,  but  merely  the  consumption  or 
annihilation  of  those  qualities  which  render  commodities  useful 
and  desirable.  To  consume  the  products  of  art  or  industry 
is,  therefore,  really  to  deprive  the  matter  of  which  they  con- 
sist of  the  utility,  and  consequently  of  the  exchangeable  value 
communicated  to  it  by  labour.  And  hence  we  are  not  to  measure 
consumption  by  the  magnitude,  the  weight,  or  the  number  of  the 
products  consumed,  but  exclusively  6?/ i/ie?>ra/Me.  Large  con- 
sumption is  the  destruction  of  large  value,however  small  the 
bulk  in  which  that  value  may  happen  to  be  compressed. 

Consumption,  in  the  sense  in  which  the  word  is  used  by  Po- Consump- 
litical  Economists,  is  synonymous  with  use.  We  produce  com-  of  Produc- 
modities  only  that  we  may  be  able  to  use  or  consume  them.j  "°"- 

for  its  importance, — a  few  further  hints  will  open  the  siibject  to  the  reader 
in  some  of  its  many  bearings,  and  lay  down  the  principles  that  should  go- 
vern the  practical  legislator  as  well  as  the  theoretical  economist  in  deciding 
upon  them. — E. 

*  This  definition  extended  a  step  further,  so  as  to  embrace  that  accumu- 
lation of  products  which  we  term  capital,  will  throw  light  on  that  impor- 
tant subject.  It  is  a  common  prejudice  to  regard  capital  as  existing  in  cer- 
tain definite  forms, — such  as  money,  houses,  or  lands.  This  definition, 
however,  extends  our  notion  of  it  to  all  that  possesses  value.  The  mate- 
rial form  is  something  incidental  and  unimportant,  the  real  capital  is  im- 
material, and,  as  it  were,  spiritual,  existing  in  value  and  use,  in  its  relation 
to  the  wants  of  man  and  the  needs  of  society.  Thus  a  man's  capital  may 
be  doubled  or  diminished  to  one  half  its  amount,  without  the  alteration  of 
one  particle  of  the  matter  of  that  in  which  it  consisted,  a  position  which  is 
illustrated  in  every  rise  and  fall  of  property — as,  for  instance,  city  lots  and 
houses  doubling  in  value  by  increase  of  inhabitants, — farms,  by  facility  of 
intercourse, — or,  on  the  other  hand,  houses  without  chance  of  tenants,  or 
ships  of  freight. — E. 

t  As  an  exception  to  this  assertion  might  be  started  by  an  unpractised 
reader,  the  case  of  articles  produced  for  sale.  The  answer  is,  that  the 
language  of  our  author  is  general  and  scientific, — having  reference,  not  to 
individuals,  but  to  man  in  general.  To  him,  consumption  is  the  sole  object 
of  production  and  the  sole  application  of  products. 

In  regard  of  the  foreign  exchanges  which  one  country  makes  witli 
another,  there  may  appear  some  doubt  as  to  the  true  method  of  stating 
them,  in  estimating  its  production  and  consumption.  The  clearest  and 
simplest  light  in  which  they  can  be  placed  is  to  rank  all  exportation 
as  consumption,  and  all  importation  as  reproduction.  The  merchant 
consumes  his  exports  and  reproduces  his  imports.  Among  the  just  and 
striking  analogies  which  arise  on  viewing  the  subject  in  tliis  light,  are  the 
following : — 

1.  Commerce  appears  under  a  new  character,  it  becomes  a  species  of  ma- 
nufacture, which  consuming  reproductively  the  surplus  of  the  annual  yield 
of  the  country,  reproduces  it  under  a  new  and  more  valuable  form, — by  a 


156  JPOLITICAL    ECONOMl'. 

Consump-     Cousuiiiption  is  the  great  end  and  object  of  all  human  industry. 

Wealth.  Production  is  merely  a  means  to  attain  an  end.  No  one  would 
produce  were  it  not  that  he  might  afterward  consume.  All  the 
products  of  art  and  industry  are  destined  to  be  consumed,  or 
made  use  of;  and  when  a  commodity  is  brought  into  a  state  fit  to 
be  used,  if  its  consumption  be  deferred  a  loss  is  incurred.  All 
products  are  intended  either  to  satisfy  the  immediate  waats,  or  to 
add  to  the  enjoyment  of  their  producers  ;  or  they  are  intended 
to  be  employed  as  capital,  and  made  to  reproduce  a  greater 
value  than  themselves.  In  the  Jirst  case,  by  delaying  to  use  them, 
it  is  plain  we  either  refuse  to  satisfy  a  want,  or  deny  ourselves 
a  gratification  it  is  in  our  power  to  obtain  ; — and  in  the  second, 

new  kind  of  alchemy  it  converts  wheat  into  gold  and  cotton  into  silk,  or  into 
whatsoever  other  metal,  or  material,  or  form,  the  dealers  a  tthis  uew  ma- 
uufacturing  mill  may  choose  to  require.  If  we  could  suppose  this  trans- 
i'ormation  thus  effected  by  art  and  skill,  what  limit  could  we  set  to  the  na- 
tional value  of  an  engine  of  such  superhuman  powers,  and  what  difference 
does  it  make  to  the  nation,  while  it  receives  the  benefit,  as  to  the  par- 
ticular process  by  which  the  conversion  is  effected. 

2.  In  estimating  the  benefits  of  commerce,  it  teaches  us  that  we  need  look 
no  further  than  the  warehouse  of  the  merchant ;  that  which  goes  in  is  to  be 
compared  with  that  which  comes  out ;  what  passes  in  the  interval  is  nothing 
more  than  the  process  of  the  manufacture, — the  merchant  scatters  his  wheat 
upon  the  waters  as  the  farmer  does  his  upon  the  land,  and  "  after  many 
days  he  finds  it," — to  judge  of  the  national  benefit,  there  is  no  more  ne- 

•cessity  of  tracing  the  changes  it  undergoes  on  the  bosom  of  the  one  than 
in  the  dark  recesses  of  the  other.  In  the  case  of  the  farmer,  we  learn  the 
quantity  sown  and  the  crop  that  he  has  reaped,  and  are  satisfied  that  in  the 
proportion  which  exists  between  them  lies  all  which  is  material  to  himself 
or  the  nation.  The  subdivision  of  his  farm,  the  rotation  of  his  crops,  and 
the  nature  of  his  fences,  we  leave  confidently  to  the  operation  of  self-inte- 
rest and  private  judgment.  So  is  it  with  the  merchant,  he  sows  cotton  and 
reaps  silk  ;  what  is  it  to  the  public  whether  it  be  upon  land  or  water ;  that 
it  brings  a  good  crop  is  all  that  concerns  the  public  to  know,  and  that  is 
known  by  it  continuing  to  be  cultivated.  As  to  the  various  processes 
through  which  that  which  is  consumed  passes  before  it  issues  again  in  its 
new  form,  that  is,  as  to  all  the  detail  of  commercial  balances,  markets,  and 
exchanges, — it  is  an  analysis  as  foreign  to  the  determination  of  the  result,  as 
an  examination  into  the  progress  of  vegetation  would  be,  previous  to  deci- 
ding on  the  profits  of  the  farmer. 

3.  This  analogy  serves  to  set  in  a  still  stronger  light,  the  absurdity  of 
resting  the  benefits  of  commerce  upon  the  balance  of  trade, — or  rather  it 
shows  that  the  rule  is  to  be  reversed,  so  far  as  any  conclusion  can  be  drawn 
from  it.  In  a  good  crop,  whether  from  land  or  sea,  the  returns  must  ex- 
ceed the  outlay — and  tlie  farmer,  and  the  merchant,  and  the  country  alike 
grow  rich,  just  in  proportion  as  they  do  so. 

These  observations  may  serve  also  to  show  the  identity  of  interest  that 
prevails  throughout  all  the  classes  of  the  community,  and  the  fallacy  of  di- 
viding tliem  into  separate  interests.  Who  is  the  farmer,  and  who  is  the 
manufacturer .''  Or  rather,  what  merchant  is  there  who  is  not  either  the 
one  or  the  other.  If  he  furnish  to  the  country  of  the  produce  of  the 
ground  he  is  the  former,  if  the  results  of  after  labour  he  is  the  latter, — no 
matter  what  materials  he  makes  them  out  of,  or  witli  what  machines  he 
works,  or  by  what  name  he  may  be  popularly  distinguislied,  to  the  eye  of 
the  political  economist,  and  in  so  far  as  he  is  connected  with  national  inte- 
rests, the  merchant  is  a  woollen,  or  cotton,  or  iron  manufacturer,  the  pro- 
prietor of  a  vineyard,  or  tlie  manager  of  a  sugar  plantation,  just  according 
to  the  varying  nature  of  the  products  which  are  the  result  of  his  labour. 
The  community,  as  such,  has  but  one  interest,  viz.  the  cheapness  and  good- 
ness of  the  commodities  it  consumes.  The  science  knows  no  such  interest 
as  that  of  the  producer, — that  interest  is  always  a  monopoly.  Production 
is  but  the  means  to  an  end, — and  the  producer  is.  in  all  cases,  but  the  ser- 
vant of  the  public. — E- 


POLITICAL  ECONOMV.  lo', 

by  delaying  to  use  them,  it  is  equally  plain  we  allow  the  instru-  Consump- 
ments  of  production  to  lie  idle,  and  lose  the  profit  that  might  be  weaik 
derived  from  their  employment. 

But,  although  all  commodities  are  produced  only  to  be  con- Tost  of  ad- 
sumed,  we  must  not  fall  into  the  error  of  supposing,  that  all  con-  cmis^ump-^ 
sumption  is  equally  advantageous  to  the  individual,  or  the  so-  ^'°"- 
ciety.  If  an  individual  employs  a  set  of  labourers  to  build  him 
a  house  the  one  summer,  and  to  pull  it  down  the  next,  their  la- 
bour, or  rather  the  capital  he  gave  them  in  exchange  for  their 
labour,  and  which  they  have  consumed  during  the  time  they 
were  engaged  in  this  futile  employment,  is  evidently  destroyed 
for  ever,  and  absolutely  lost  both  to  himself  and  the  public  ; 
whereas,  had  he  employed  them  in  the  raising  of  corn,  or  in  the 
production  of  any  species  of  valuable  produce,  he  would  have 
obtained  commodities  of  equal,  or  more  than  equal,  value  to  the 
capital  he  gave  them.  The-cmlue  of  the  returji,  or  the  advantage 
obtained  from  the  consumption,  is,  therefore,  the  true  and  only  test 
of  advantageous  and  disadvantageous,  or,  as  it  is  more  commonly 
termed,  of  productive  and  unproductive  consumption.  Com- 
modities ?^ve  comnm^di  productively  when  the  advantage  or  benefit 
accruing  in  consequence  to  their  possessors,  or  when  the  value 
of  the  products  obtained  in  their  stead  exceeds  their  value  ;  and 
they  are  consumed  unproductively  when  the  value  of  the  advan- 
tage or  benefit,  or  the  value  of  the  new  commodities,  is  less 
than  their  value.  It  is  on  this  balance  of  consumption  and  re- 
pi-oduction,  and  not,  as  was  so  long  supposed,  on  the  balance  of 
trade,  that  the  prosperity  or  decay  of  every  nation  depends.  If, 
in  given  periods,  the  commodities  produced  in  a  country  exceed 
those  consumed  in  it,  the  means  of  increasing  its  capital  will  be 
provided,  and  its  population  will  either  increase,  or  the  actual 
numbers  will  be  better  accommodated,  or  both.  If  the  con- 
sumption in  such  periods  fully  equals  the  reproduction,  no  means 
will  be  afforded  of  increasing  the  stock  or  capital  of  the  nation, 
and  society  will  be  at  a  stand.  And  if  the  consumption  exceeds 
the  reproduction,  every  succeeding  period  will  see  the  society 
worse  supplied  ;  its  prosperity  and  population  will  evidently  de- 
cline, and  pauperism  will  gradually  and  progressively  spread  it- 
self over  the  whole  country. 

It  is  impossible,  however,  to  fix  on  any  standard  by  a  compari- 
son with  which  we  may  be  able  to  obtain  even  a  tolerable  ap- 
proximation to  the  comparative  value  or  advantage  of  different 
kinds  of  consumption.  This  is  a  point  on  which  the  sentiment? 
of  no  t«o  individuals  can  ever  exactly  coincide.  The  opinions 
of  each  will  always  depend  more  or  less  on  the  situation  in  which 
he  is  placed.  The  rich  man  will  naturally  be  inclined  to  give  a 
greater  extension  to  the  limits  of  advantageous  consumption  than 
the  man  of  middling  fortune  ;  and  the  latter  than  the  man  who 
is  poor.  And  it  is  undoubtedly  true  that  a  man's  expenses  ought 
alwaj's  to  bear  some  proportion  to  the  magnitude  of  his  fortune, 
and  his  condition  in  society  ;  and  that  v/hat  might  be  proper  and 
advantageous  expenditure  in  one  case,  might  be  exceedmgly  im- 
proper and  disadvantageous  in  another.  It  is,  therefore,  quite 
impossible  to  liame  any  system  Of  rules  on  the  subject  of  expen- 
diture, which  shall  be  applicable  to  the  case  of  evei-y  individual : 
and  even  if  it  were  practicable,  there  is  no  ground  to  think  that 

20 


loB 


FULITICAL   KCGNOMV. 


Consump- 
fion  of 
Wealth. 


Luxury  not 

diaadvan- 

tageous. 


the  lormalion  of  such  rules  would  be  of  the  smallest  utility.  The 
state  has  no  right  whatever  to  control  individual  expenditure  ; 
nor,  even  if  it  had  such  a  right,  could  it  exercise  it  without  oc- 
casioning serious  injury.  The  public  interest  requires  that  the 
national  capital  should,  if  possible,  be  constantly  kept  on  the  in- 
crease ;  or,  which  is  the  same  thing,  that  the  consumption  of  any 
given  period  should  be  made  the  means  of  reproducing  a  greater 
value.  But  we  have  sufficiently  proved  that  this  cannot,  in  any 
case,  or  under  any  circumstances,  be  the  result  of  a  system  of 
surveillance  and  restriction.  Industry  and  frugality  never  have 
been,  and  never  can  be,  promoted  by  such  means.  To  render  a 
man  industrious,  secure  him  the  peaceable  enjoyment  of  the 
fruits  of  his  industry  ; — to  wean  him  from  extravagance,  and  to 
render  him  frugal  and  parsimonious,  allow  him  to  reap  all  the 
disadvantage  of  the  one  line  of  conduct,  and  all  the  advantage  of 
the  other.  The  poverty  and  loss  of  station  which  is  the  neces- 
sary and  inevitable  result  of  improvident  and  prodigal  consump- 
tion, is  a  sufficient  secvirity  against  its  ever  becoming  injuriously 
prevalent  ;  and  v/herever  the  public  burdens  are  moderate, 
property  protected,  and  the  perfect  and  uncontrolled  freedom 
of  industry  secured,  the  constant  efforts  of  the  great  body  of  the 
people  to  rise  in  the  world  and  improve  their  condition-,  will  en- 
sure the  continued  increase  of  national  wealth.  It  is  idle  to  ex- 
pect that  all  unproductive  and  unprofitable  expenditure  can  ever 
be  avoided  ;  but  the  experience  of  all  tolerably  well  governed 
states  proves,  that  the  amount  of  the  produce  of  industry  pro- 
ductively expended,  is  always  infinitely  greater  than  that  which 
is  expended  unproductively. 

It  was  long  a  prevalent  opinion  among  moralists,  that  the  la- 
bour bestowed  on  the  production  of  luxuries,  and  consequently 
their  consumption,  was  unproductive.  But  this  opinion  is  now 
almost  universally  abandoned.  Unless,  indeed,  all  comforts  and 
enjoyments  are  to  be  proscribed,  it  is  impossible  to  say  where 
necessaries  end,  and  luxuries  begin.  But  if  we  are  to  under- 
stand by  necessaries  such  products  only  as  are  absolutely  re- 
quired tor  the  support  of  human  life,  every  thing  but  wild  fruits, 
roots,  and  water,  must  be  deemed  superfluous  ;  and  in  this  view 
of  the  matter,  the  peasantry  of  Ireland,  who  live  only  on  po- 
tatoes and  butter-milk,  must  be  considered  as  contributing  much 
more  to  the  national  wealth  than  the  peasantry  of  Britain  !  The 
mere  statement  of  such  a  doctrine  is  sufficient  for  its  refutation. 
Every  thing  that  stimulates  exertion  is  advantageous.  The  mere 
necessaries  of  life  may  be  obtained  with  comparatively  little 
labour  ;  and  those  savage  and  uncivilized  hordes,  who  have  no 
desire  to  possess  its  comforts,  are  proverbially  and  notoriously 
indolent  and  dissipated.  To  make  men  industrious — to  make 
them  shake  ofl'  that  lethargy  which  is  natural  to  them,  they  must 
be  inspired  with  a  taste  for  the  luxuries  and  enjoyments  of 
civilized  life.  When  this  is  done,  their  artificial  wants  will  be- 
come equally  clamorous  with  those  that  are  strictly  necessary, 
and  they  will  increase  exactly  as  the  means  of  gratifying  them 
increase.  Wherever  a  taste  for  comforts  and  conveniencies  has 
been  generally  diffused,  the  wants  and  desires  of  man  become 
altogether  unlimited.  The  gratilication  of  one  leads  directly  to 
tlie  fox'mation  of  another.     In  highly  civilized  societies,  new 


POLITICAL    KCONOxMV.  159 

products  and  new  modes  of  enjoyment  are  constantly  presenting  Consump- 
themselves  as  motives  to  exertion,  htuI  as  means  of  rewarding  it.  wcaiiti 
Perseverance  is,  in  consequence,  given  to  all  the  operations  of 
industry ;  and  idleness,  and  its  attendant  ti'ain  of  evils,  almost 
entirely  disappear.  "  What,"  asks  Dr.  Paley,  "  can  be  less 
necessary,  or  less  connected  with  the  sustentation  of  human  life, 
than  the  whole  produce  of  the  silk,  lace,  and  plate  manuiactory  ? 
Yet  what  multitudes  labour  in  the  dilierent  branches  of  these 
arts  !  What  can  be  imagined  more  capricious  than  the  fondness 
for  tobacco  and  snuff  ?  Yet  how  many  various  occupations,  and 
how  many  thousands  in  each,  are  set  at  work  in  administering 
to  this  frivolous  gratification  !"  It  is  the  stimulus  which  the  de- 
sire to  possess  these  articfes  of  luxury  gives  to  industry  that 
renders  their  introduction  advantageous.  The  earth  is  capable 
of  furnishing  food  adequate  for  the  support  of  a  much  greater 
portion  of  human  beings  than  can  be  employed  in  its  cultivation. 
But  those  who  are  in  possession  of  the  soil  will  not  part  with 
their  produce  for  nothing  ;  or  rather,  they  will  not  raise  at  all 
what  they  can  neither  use  themselves  nor  exchange  for  what 
they  want.  As  soon,  however,  as  a  taste  for  conveniencies  and 
luxuries  has  been  introduced,  the  occupiers  of  the  ground  raise 
from  it  the  utmost  that  it  can  be  made  to  produce,  and  exchange 
the  surplus  for  such  conveniencies  and  gratifications  as  they  are 
desirous  of  obtaining  :  and,  in  consequence,  the  producers  of 
these  articles,  though  they  have  neither  property  in  the  soil,  nor 
any  concern  in  its  cultivation,  are  regularly  and  liberally  supplied 
with  its  produce.  In  this  way,  the  quantity  of  necessaries,  as 
well  as  of  useful  and  agreeable  products,  is  vastly  increased  by 
the  introduction  of  a  taste  for  luxuries  ;  and  the  population  are, 
in  consequence,  not  only  better  provided  for,  but  their  numbers 
are  proportionably  and  greatly  augmented. 
.  It  is  plain,  therefore,  that  the  consumption  of  luxuries  cannot, 
provided  it  be  confined  within. proper  limits,  be  justly  considered 
as  either  disadvantageous  or  unproductive.  If,  indeed,  a  man 
vv^ere  to  consume  more  luxuries  than  his  labour  or  his  fortune 
enabled  him  to  command,  his  consumption  would  be  disadvanta- 
geous. But  it  is  plain,  the  same  thing  would  equally  have  hap- 
pened had  he  consumed  a  greater  quantity  of  necessaries  than  he 
could  afford.  The  mischief  does  not  consist  in  the  species  of 
articles  consumed,  but  in  the  excess  of  their  value  over  the  means 
of  purchasing  them  possessed  by  the  consumers.  This,  how- 
ever, is  a  fault  which  ought  always  to  be  left  to  be  corrected  by 
the  self-interest  of  those  concerned.  The  poverty  and  degrada- 
tion caused  by  indulging  in  unproductive  consumption  is  a  natural 
and  sufficient  guarantee  against  its  ever  being  carried  to  an  inju- 
rious extent.  To  attempt  to  lessen  unproductive  consumption 
by  proscribing  luxury,  is  really  the  same  thing  as  to  attempt  to 
enrich  a  country  by  taking  away  some  of  the  most  powerful  mo- 
tives to  production.* 

*  That  sumptuary  laws  are  unwise  may  be  judged  from  their  general 
abandonment ;  once  they  were  common  throughout  Europe,  now  they 
are  confined  almost  to  the  mountains  of  Switzerland.  At  an  early  period, 
tliey  formed  a  prominent  feature  of  the  colonial  laws  of  our  country,  but 
as  their  old  annalist  observ.es,  survived  not  its  "  golden  age."  They 
were  found  here,  as  elsewhere,  to  be  inconsistent  with  the  progress  of 


]60  POLITICAL  ECOXOMV. 

consump  Dr.  Smith  has  given  another  criterion  of  productive  and  un- 

WwUh.  productive  consumption  ;  but  his  opinions  on  this  subject,  though 

— .   ,  exceedingly  ingenious,  and  supported  with  his  usual  ability,  ap- 

CritevTon  o*f  pear  to  rest  on  no  solid  foundation.     He  divides  society  into  two 

Productive  orj-eat  classes.     The  first  consist  of  those  who  fix,  or,  as  he  terms; 

ana  Unpro-    »  .  ,     •     i    i  •  •       •  .  •'  ,-,  , 

ductiveCoii-  it,  "  realize  their  labour  m  some  particular  subject,  or  vendible 
sumption,  commodity,  which  lasts  for  some  time  at  least  atler  that  labour  is 
past ;"  the  second  of  those  whose  labour  leaves  nothing  in  exists 
ence  after  the  moment  of  exertion,  but  perishes  in  the  act  of  per- 
formance. The  former  are  said  by  Dr.  Smith  to  be  productive, 
the  latter  unproductive  hihourers.  Not  that,  in  making  this  dis- 
tinction, Dr.  Smith  means  to  undervalue  the  services  performed 
by  the  unproductive  class,  or  to  deny  that  they  are  often  of  the 
highest  utility  ;  for  he  admits  that  such  is  frequently  the  case  : 
but  he  contends,  that  these  services,  however  useful,  do  not  aug- 
ment the  wealth  of  the  country  ;  and,  consequently,  that  the'com- 
modities  consumed  by  this  class  are  unproduetively  consumed, 
and  have  a  tendency  to  impoverish,  not  to  enrich  the  society. 
''  But  to  avoid  the  chance  of  misrepresentation,  we  shall  give  Dr. 
Smith's  opinions  in  his  own  words. 

"  There  is  one  sort  of  labour,"  says  he,  "  which  adds  to  the 
value  of  the  subject  upon  which  it  is  bestowed  ;  there  is  another 
which  has  no  such  effect.  The  former,  as  it  produces  a  value, 
may  be  called  productive  ;  the  latter  unproductive  labour.  Thus 
the  labour  of  a  manufacturer  adds,  generally,  to  the  value  of  the 
materials  which  he  works  upon,  that  of  his  own  maintenance, 

wealth.  Franklin  in  his  homely  way  illustrates  the  principle  by  the  eifect 
produced  by  "  a  fine  bonnet"  from  Philadelphia,  upon  the  habits  of  a  re- 
tired village  in  Pennsylvania ;  it  turned  all  the  idle  young  women  into  in- 
dustrious knitters  and  spinners,  in  order  to  procure  the  means  of  similar 
display. 

It  has  been  often  questioned  whether  Political  Economy  be  a  moral 
science  ;  the  decision  of  Adam  Smith  and  his  followers  is  against  it ;  the 
production  of  material  wealth  is  the  only  question  they  admit.  National 
prosperity  as  it  rests  upon  the  higher  sources  of  talent,  learning,  science, 
and  virtue,  is  altogether  excluded,  together  with  all  reference  to  indivi- 
dual enjoyment.  According  to  the  policy  of  this  system,  every  man  would 
labour  like  a  slave,  hoard  like  a  miser,  and  live  like  an  anchorite  ;  and  if 

•  this  is  not  to  be  the  result,  it  is  because  reason  and  propriety  and  prudence 
are  overruling  considerations,  and  these  are  moral  motives.  We  may, 
therefore,  regard  Political  Economy  to  "he  what  all  science  must  be,  whicli, 
has  reference  to  the  conduct  and  wellbeing  of  man,  a  moral  science,  go- 
verned by  those  limitations  which  are  imposed  by  virtue  and  prudence, 
and  including  all  those  operating  causes  which  influence  his  character,  and 
happiness.  To  this  view  of  it,  there  lies  indeed  the  objection,  that  it 
introduces  many  considerations  of  a  general  and  moral  nature',  and  there- 
fore not  easily  estimated.  But  in  answer,  let  it  be  observed,  that  it  also 
gives  to  the  science  the  greater  advantage  of  truth  of  application,  and 

.  forms  the  politician,  not  upon  the  rashness  of  theory,  but  upon  tne  calm 
confidence  of  practical  investigation.  He  alone  who  studies  Political  Eco- 
nomy as  a  moral  science,  brings  into  calculation  all  the  elements  upon 
which  national  prosperity  deiiends  ;  hence,  the  results  at  which  he  arrives 
are  most  likely  to  be  found  in  accordance  with  fact,  and  the  principles  he 
deduces  to  be  true,  and  practical,  and  operative,  since  they  arc  derived 
from  a  joint  examination  of  the  nature  of  wealth  and  the  nature  of  man 
who  estimates  it.  The  ground  of  this  decision  is  a  universal  axiom.  Eve- 
ry rule  and  law  which  is  intended  to  be  operative  upon  man,  must  be 
based  upon  the  knowledge  of  that  compound  nature  which  it  proposes  to 
regulate,  for  otherwise  it  will  in  practice  be  found  to  be  cither  inapplica- 
ble, inefficient,  or  injurioue. — F. 


POLITICAL    ECOXOMV.  Itil 

and  of  his  master's  profit.  The  labour  of  a  menial  servant,  on  consump- 
the  contrary,  adds  to  the  value  of  nothing.  Though  the  manu-  vveaUh. 
facturer  has  his  wages  advanced  to  him  by  his  master,  he,  in  re- 
ality, costs  him  no  expense,  the  value  of  those  wages  being 
.generally  restored,  together  with  a  profit,  in  the  improved  value 
of  the  subject  upon  which  his  labour  is  bestowed.  But  the  main- 
tenance of  a  menial  servant  never  is  restored.  A  man  grows 
rich  by  employing  a  multitude  of  manufacturers  ;  he  grows  poor 
by  maintaining  a  multitude  of  menial  servants.  The  labour  of 
the  latter,  however,  has  its  value  and  deserves  its  reward  as  well 
as  that  of  the  former.  But  the  labour  of  the  manufacturers 
fixes  and  realizes  itself  in  some  particular  subject,  or  vendible 
commodity,  which  lasts  for  some  time  at  least  afler  that  labour 
is  past.  It  is,  as  it  were,  a  certain  quantity  of  labour  stocked 
and  stored  up  to  be  employed,  if  necessary,  upon  some  other 
occasion.  That  subject,  or,  what  is  the  same  thing,  the  price  of 
that  subject,  can  afterward,  if  necessary,  put  into  motion  a  quan- 
tity of  labour  equal  to  that  which  had  originally  produced  it. 
The  labour  of  the  menial  servant,  on  the  contrary,  does  not  fix 
or  realize  itself  in  any  particular  subject  or  vendible  commodity. 
His  services  generally  perish  in  the  very  instant  of  their  per- 
formance, and  seldom  leave  any  trace  or  value  behind  them  for 
which  an  equal  quantity  of  service  could  afterward  be  pro- 
cured. 

"  The  labour  of  some  of  the  most  respectable  orders  in  the 
society  is  like  that  of  menial  servants,  unproductive  of  any  value, 
and  does  not  fix  or  realize  itself  in  any  permanent  subject  or 
vendible  commodity,  which  endures  after  that  labour  is  past,  and 
for  which  an  equal  quantity  of  labour  could  afterward  be  pro- 
cured. The  sovereign,  for  example,  with  all  the  officers  both 
of  justice  and  war  who  serve  under  him,  the  whole  army  and 
navy,  are  unproductive  labourers.  They  are  the  servants  of 
the  public,  and  are  maintained  by  a  part  of  the  annual  produce 
of  the  industry  of  other  people.  Their  service,  how  honourable, 
how  necessary,  or  how  useful  soever,  produces  nothing  for 
which  an  equal  quantity  of  service  can  afterward  be  procured. 
The  protection,  security,  and  defence  of  the  commonwealth,  the 
effect  of  their  labour  this  year,  will  not  purchase  its  "protection, 
security,  and  defence  for  the  year  to  oome.  In  the  same  class 
must  be  ranked  some  both  of  the  greatest  and  most  important, 
and  some  of  the  most  frivolous  professions  :  churchmen,  lawyers, 
physicians,  men  of  letters  of  all  kinds;  players,  buffoons,  musi- 
cians, opera-singers,  opera-dancers,  &c.  The  labour  of  the  mean- 
est of  these  has  a  cei'tain  value,  regulated  by  the  very  same  prin- 
ciples which  regulate  that  of  every  other  sort  of  labour  ;  and  that 
of  the  noblest  and  most  useful  produces  nothing  which  could  af- 
terward purchase  or  procure  an  equal  quantity  of  labour.  Like 
the  declamation  of  the  actor,  the  harangue  of  the  orator,  or  the 
tune  of  the  musician,  the  work  of  all  of  them  perishes  in 
the  very  instant  of  its  production."  (Wealth  of  JVations,  II. 
p.  1.)* 

*  The  invidious  distinction  here  drawn  between  the  various  classes  of  the 
community  by  arranging  them  as  productive  or  unproductive  labourers,  is 
one  of  the  narrow  and  imperfect  views  which  is  justly  discarded  in  thf 
liberal  svstem  of  Political  Economv. 


162  POLITICAL    ECONOMV. 

Gonsump-  Sucli  arc  the  opinions  of  Dr.  Smith,  and  it  Avill  not,  we  think. 

Wealth.       be  very  difficult  to  show  the  fallacy  of  the  distinction  he  has 
P^~        endeavoui-ed  to  establish  between  the  labour,  and  consequently 
Distinction    also  the  cousuuiption,  of  the  different  classes  of  society.       To 
Different''"'  ^egin  with  the  case  of  the  menial  servant  : — Dr.  Smith  says,  that. 
ciu8sesof     his  labour  is  unproductive,  because  it  is  not  realized  in  a  vendible 
6ho*wii'^o  be  commodity,  while  the  labour  of  the  manufacturer  is  productive, 
iii-foundcd.  bccause  it  is  so  reahzed.     But  of  what,  may  we  ask,  is  the  la- 
It  is  an  early  and  natural  prejudice,  that  some  portions  of  society  are 
idle,  contribute  nothing;  to  public  prosperity,  and  live  solely  upon  the  la- 
bour of  others.     This  error  meets  us  under  different  forms. 

1.  The  vulgar  prejudice  against  the  rich  as  if  they  were  supported  by 
the  poor,  and  themselves  contributed  nothing  to  the  common  sustenance  of 
the  whole.  Science  has  put  down  this  language  of  ignorance  and  envy, 
and  shown  that  the  capital  of  the  rich  man  is  as  effective  in  the  support 
of  society,  as  the  manual  labour  of  the  poor.  Indeed  if  any  distinction  is 
to  be  drawn  between  them  it  is  in  favour  of  capital  as  the  higher  agent, 
Avhich  sets  in  motion,  and  so  far  supports  all  the  productive  industry  of  the 
country,  that  if  it  should  be  diminished  one  half,  one  half  the  labourers 
Avould  immediately  be  driven  away  by  starvation. 

2.  A  more  scientific,  but  not  better  founded  opinion,  is  that  of  the 
French  economists,  who  stigmatized  as  unproductive  labourers  all  those 
who  contributed  not  to  the  products  of  agriculture.  This  alone,  accord- 
ing to  them,  furnished  a  surplus  return  to  labour, which  appeared  in  the  fomi 
of  rent  paid  to  the  landholder  for  the  productive  services  of  the  soil.  This 
prejudice  is  also  exploded  by  advcUicing  science,  which  shows — First,  that 
rent  is  the  result,  not  of  the  higher,  but  of  the  more  stinted  energies  of 
nature  in  the  processes  of  agriculture — Secondly,  that  all  other  classes  are 
equally  with  the  farmer  raisers  of  grain,  provided  their  labours  enable 
him  to  devote  himself  unreservedly  to  its  cultivation— and  lastly,  that  raw 
produce  is  without  value  till  manufacturing  labour  brings  it  into  a  form 
subservient  to  the  use  of  man,  and  commercial  labour  has,  by  a  series  of 
exchanges,  brought  it  to  the  hands  of  the  consumer. 

3.  The  most  liberal  form  under  which  tliis  prejudice  exists,  is  that  main- 
tained by  Adam  Smith,  as  quoted  in  the  text,  excluding  all  from  the  pro- 
ductive class  %vhose  labour  is  not  realized  in  a  material  form.  This  dis- 
tinction arose  necessarily  from  his  definition  of  wealth,  which  he  confined 
to  material  products. 

The  result  of  these  views,  was  the  division  of  society,  by  ^dam  Smith, 
into  the  four  following  classes : — 

1 .  Labourers,  who  perform  the  work,  and  who  live  on  wages. 

2.  Capitalists,  i.  e.  holders  of  land  or  money,  who  furnish  to  the  former 
the  means  of  labour,  and  who  .live  on  rent. 

3.  Traders,  who  facilitate  the  exchanges  necessary  to  society,  and  who 
live  on  profits.  . 

4.  Servants  or  drones  of  society,  comprising  the  discordant  assemblage 
of  king,  magistrates,  professional  men,  players,  house  servants,  and  va- 
gabonds. 

The  question  lies,  not  with  regard  to  tlie  correctness  of  his  conclusions 
which  are  incontrovertible  upon  the  principles  on  which  he  sets  out, 
but  to  the  expediency  of  the  premises  themselves.  For  a  defence  of  the 
views  of  .A.dam  Smith,  see  the  Review  of  this  article,  in  the  Quarterlv. 
Vol.  XXX.  p.  299. 

The  frequent  anomalies  wliich  arise  out  of  this  limitation  of  wealth, 
would  seem  to  show  that  there  is  something  erroneous  in  the  principle  upon 
which  it  rests.  As  for  instance,  a  musical  instrument  is  a  portion  of  wealth, 
and  he  who  made  it  is  a  productive  labourer,  while  he  whose  skill  ap- 
plies it  to  the  only  use  for  which  it  was  made,  and  thereby  prevents  it  from 
being  wholly  useless,  he  is  an  unproductive  labourer.  He  who  polishes 
boots  to  be  sold  is  a  productive  labourer — he  who  performs  the  same  office 
in  a  family  is  an  unproductive  labourer.  Indeed  this  inconjistency  may  be 
made  to  appear  in  a  thousand  instances,  and  is  very  well  exemplified  by 
our  author  in  the  text. 


rOLITICAL    ECONOJIY*  1G3 

bour  of  ihe  manufacturer  really  productive  ?  Does  it  not  consist  Coneump- 
exclusively  of  comforts  and  conveniencies  required  for  the  use  wealth, 
and  accommodation  of  society  ?  The  manufacturer  is  not  a  pro- 
ducer of  matter,  but  of  utility  only.  And  is  it  not  obvious  that 
the  labour  of  the  menial  servant  is  also  productive  of  utility  ? 
If,  for  example,  the  labour  expended  in  converting  the  wool  of 
the  sheep  into  a  coat  be,  as  it  unquestionably  is,  productive,  then 
surely  the  labour  expended  in  cleaning  and  brushing  the  coat, 
and  rendering  it  fit  to  be  worn,  must  be  so  too.  It  is  universally 
allowed,  that  the  labour  of  the  husbandman  in  raising  corn,  beef, 
and  other  articles  of  provision,  is  productive  ;  but  if  so,  why  is 
the  labour  of  the  menial  servant  who  performs  the  necessary  and 
indispensable  task  of  preparing  and  dressing  these  articles,  and 
fitting  them  to  be  used,  to  be  stigmatized  as  unproductive  ?  It 
is  clear  to  demonstration,  that  there  is  no  difference  whatever 
between  the  two  sppcies  of  industry — that  they  are  either  both 
productive,  or  both  unproductive.     To  produce  a  fire,  is  it  not 

In  opposition  to  these  exclusive  views,  appears  the  liberal  system  of 
Ganihl,  Say,  Malthus,  &c.  According  to  this  system  every  man  is  a  pro- 
ductive labourer,  if  neither  thief  nor  beggar.  If  he  maintain  himself,  he 
must  do  it  by  producing  either  the  direct  means  of  subsistence,  or  what 
society  considers  as  an  equivalent,  he  exchanges  equal  values  with  those 
around  him — he  gives  either  labour,  or  capital,  or  land,  or  skill,  or  talent 
of  some  kind  or  other,  but  of  equal  value  in  the  eyes  of  the  community, 
with  that  which  he  receives  in  exchange.  But  to  this  wide  principle  there 
are  two  exceptions — political  and  moral. 

1.  Political. — Wlien  left  to  the  voluntary  support  of  society,  no  order 
of  men  can  become  too  numerous — arbitrarily  supported,  they  may,  and 
often  do — as  ecclesiastics  in  Romish-  countries,  and  officers  of  state  under 
monarcliical  governments. 

2.  Moral. — This  exception  is  twofold. — 1.  Exclusive.     2.  Limiting. 

1.  Excluding  those  who  live  by  preying  upon  the  vices  of  men  and  the 
corruptions  of  society.  The  kidnapper,  the  gambler,  the  provider  of  the 
means  of  gaming,  intemperance,  and  vice,  all  fall  under  this  head.  They 
are  self  supported,  but  at  the  same  time  ruinous  members  of  the  commu- 
nity. Among  these  specifications  as  a  prominent  evil  of  our  countiy,  and 
more  especially  of  the  city  of  New- York,  may  be  mentioned  the  facilities 
given  to  intemperance  by  a  needless  multiplication  of  licensed  retailers  of 
spirituous  liquors.  It  is  an  evil  great  and  manifold,  moral,  political,  and. 
economical,  striking  at  the  rout  of  national  prosperity,  and  filling  society 
witli  poverty  and  crime. 

2.  Limiting  by  the  rules  of  moderation  and  prudence  those  who  furnish 
the  means  of  public  amusement.  This  is  a  check,  however,  which  lies 
not  in  the  laws  but  in  the  manners  of  society,  and  is  a  further  proof  of  the 
moral  character  of  the  science  which  requires  it. 

The  division  which  Say  makes  of  the  various  classes  of  society  is  a'i 
follows.  He  brings  into  the  rank  of  productive  labourers,  all  who  fall 
within  the  following  classification : 

1.  Holders  of  land  or  of  any  other  natural  agent. 

2.  Capitalists  who  furnish  the  means  of  supporting  the  labourer.     And. 

3.  The  industrious  class  which  includes  all  who  live  upon  labour,  men- 
tal or  corporeal.  This  class  compi-ehends  the  excluded  labourers  of  Adam 
Smith,  and  is  subdivided  as  follows  : — 

1.  Those  who  obtain  the  raw  materials,  or  agriculturists. 

2.  Who  give  to  it  utility  by  change  of  form,  or  manufacturing  labourer.-. 

3.  Who  bring  it  to  the  hands  of  the  consumer,  'A^ommercial  labourers. 

4.  Who  increase  the  p«wer  of  the  preceding  lauo^irers,  direct  tlieir  ef- 
forts, or  secure  the  fruits  of  their  labour.     This  includes, 

1.  Government  in  all  its  branches,  who  preserve  the  peace,  safety,  and 
good  order  of  society. 

2.  Education  in  all  its  forms,  intellectual,  moral,  and  religious, 

3.  Science  in  all  its  inodifications. — E. 


164  I'OLITICAL    ECONOMY. 

Consump-  just  as  iiecessary  that  coals  should  be  carried  from  the  cellar  lo 
WeaUh.  the  grate,  as  that  they  should  be  carried  from  the  bottom  of  the 
mine  to  the  surface  of  the  earth  ?  And  if  it  is  said,  that  the 
miner  is  a  productive  labourer,  must  we  not  also  say  the  same  of 
the  servant,  who  is  employed  to  make  and  mend  the  fire  ?  The 
whole  of  Dr.  Smith's  reasoning  proceeds  on  a  false  hypothesis. 
He  has  made  a  distinction  where  there  is  none,  and  where  there 
can  be  none*  The  end  of  all  human  exertion  is  the  same — that 
is,  to  increase  the  sum  of  necessaries,  comforts,  and  enjoyments  ; 
and  it  must  be  left  to  the  judgment  of  every  man  to  determine 
what  proportion  of  these  comforts  he  will  have  in  the  shape  of 
menial  services,  and  what  in  the  shape  of  material  products.  It 
is  an  error  to  suppose  that  a  man  is  impoverished  by  maintaining 
menial  servants,  any  more  than  by  indulging  in  any  other  species 
of  expense.  It  is  true  he  will  be  ruined  if  he  keeps  more  ser- 
vants than  he  has  occasion  for,  or  than  he  can  afford  to  pay ; 
but  his  ruin  would  be  equally  certain  were  he  to  purchase  an  ex- 
cess of  food  or  clothes,  or  to  employ  more  workmen  in  any 
branch  of  manufacture  than  are  required  to  carry  it  on,  or  than 
his  capital  could  employ.  To  keep  two  ploughmen  when  one 
only  might  suffice,  is  just  as  improvident  and  wasteful  expen- 
diture as  it  is  to  keep  two  footmen  to  do  the  business  of  one.  // 
is  in  the  extravagant  quantity  of  the  commodities  we  consume  or  of 
the  labour  we  employ,  and  not  in  the  particular  species  of  com- 
modities or  labour,  that  we  must  seek  for  the  causes  of  impover- 
ishment.'\ 

*  For  an  able  defence  of  Smith  against  this  heavy  charge,  see  the  Re- 
view of  this  article,  already  quoted,  in  the  Quarterly,  No.  60  ;  where  the 
rcWewer  has  the  accidental  advantage  of  pressing  upon  our  author  the 
inconsistency  of  these  sentiments,  with  the  definition  with  which  he  com- 
mences, viz.,  that  Political  Economy  is  "  the  science  of  the  laws  whiclt 
regulate  the  production,  distribution,  and  consumption  oi  material  pro- 
ducts.'''' This,  however,  is  foreign  to  the  merits  of  the  decision.  The  real 
question  turns  upon  this  single  consideration — whether  tlie  science  relates 
to  exchangeable  value  in  general,  or  solely  to  that  value  which  exists  in 
material  products.  It  is,  in  short,  a  question  of  consistency  of  definition, 
rather  than  of  truth  of  reasoning.  The  conclusions  of  Adam  Smith  are 
equally  logical  with  those  of  Ricardo.  The  choice  is  to  be  made  in  the 
premises  from  which  they  set  out,  and  that  choice  is  to  be  determined  by 
comparing  them,  and  the  results  which  flow  from  them,  with  the  truth  and 
nature  of  things.  If  there  be  such  a  portion  of  national  wealth  as  skill, 
science,  and  learning,  then  is  the  definition  to  be  rejected  which  excludes 
•  the  consideration  of  them.  If  from  certain  premises  we  arrive  at  the  con- 
clusion that  such  men  as  Watt,  and  Whitney,  and  Fulton,  were  unproduc- 
tive labourers,  then  are  the  premises  to  be  denied  from  which  follows  so 
imjust  a  conclusion. — E. 

t  The  principle  here  laid  down,  is  not  only  true  in  theory,  but  highly 
valuable  in  practice.  It  affords  a  solution  of  the  anomalous  case  of  ill  suc- 
cess combined  with  economy, — poverty  resulting,  not  from  e:xtravagance, 
but  from  want  of  good  management.  Such  persons  are  economical,  per- 
haps penurious  in  their  habits ;  live  miserably  and  yet  succeed  ill, — while 
others,  with  no  greater  advantages,  aflbrd  themselves  all  reasonable  com- 
forts, and  yet  go  on  and  prosjjer.  .  The  reason  may  be  stated  in  the  words 
of  our  author,  "they  keep  two  ploughmen  to  do  the  work  of  one;"  what- 
ever be  their  business,  there  is  a  wastefulness  of  time,  of  labour,  or  of  capi- 
tal, in  all  their  arrangements,  which  increases  to  them  the  cost  of  produc- 
tion, and  renders  the  natural  price  of  the  commodity  which  they  furnish, 
an  insufficient  return  for  that  wliich  it  costs  them.  The  natural  price  ol 
the  commodity,  whether  it  be  tlie  result  «>f  mental  or  manual  labour,  is 
always  regulated  bv  the  cost  at  which  the  industrious  and  skilfulcan  fur- 


i'lJLITlCAL    ECONOMY.  1  <Ji 

The  same  reasoning  applies  to  all  the  other  cases  nieniionecl  f^^;;'*^',?'^ 
by  Dr.  Smith.  Take,  for  example,  the  case  of  the  physician.  weMti.. 
Dr.  Smith  tells  ns  that  he  is  an  unproductive  labourer,  because  p^~.„^^ 
he  does  not  directly  produce  something;  that  has  exciiangeable  physi.  ian. 
value.  But  if  he  does  the  same  thing  indirecthj,  what  is  the 
difference  ?  If  the  exertions  of  the  physician  are  conducive  to 
health,  and  if,  as  is  undoubtedly  the  case,  he  enables  others  to 
produce  more  than  they  could  do  without  his  assistance,  then  it 
is  plain  he  is  indirectbj,  at  least,  if  not  directly,  a  productive 
labourer.  Dr.  Smith  makes  no  scruple  about  admitting  the  just 
title  of  the  workman  employed  to  repair  a  steam-engine  to  be 
enrolled  in  the  productive  class  ;  and  yet  he  would  place  a  phy- 
sician, who  had  been  instrumental  in  saving  the  life  of  an  Ark- 
wright  or  a  Watt,  among  those  that  are  unproductive  !  It  is  im- 
possible that  these  inconsistencies  and  contradictions  could  have 
occurred  to  Dr.  Smith  ;  and  the  errors  into  which  he  has  fallen 
in  treating  this  important  branch  of  the  science,  shows  in  the 
strongest  manner  the  absolute  necessity  of  advancing  with  ex- 
treme caution,  and  of  subjecting  every  theory,  how  plausible  and 
ingenious  soever  it  may  appear  when  first  stated,  to  a  severe  and 
patient  examination. 

The  amusements  furnished  by  players,  singers,  and  so  forth, 
come  under  the  description  of  luxuries,  and  have  precisely  the 
same  effect  on  the  public  wealth  as  the  introduction  of  a  taste 
for  tobacco,  tea,  or  other  superfluities.  They  create  new  wants, 
and  by  so  doing,  stimulate  our  industry  to  procure  the  means  of 
gratifying  them.  They  are  really,  therefore,  a  means  of  pro- 
duction ;  and  while  they  furnish  us  with  elegant  and  amusing 
recreation,  they  certainly  add  to  the  mass  of  useful  material 
products. 

The  productiveness  of  the  higher  class  of  functionaries  men-  Public 
tioned  by  Dr.  Smith  is  still  more  obvious.     So  far,  indeed,  from  rie"pJodui: 
being  unproductive,  they  are,  when  they  discharge  properly  the  ''^^^p^^' 
duties  of  their  high  station,  the  most  productive  labourers  in  a  " 
state.     Dr.  Smith  says,  that  the  results  of  their  service,  that  is, 
to  use  his  own  words,  "  the  protection,  security,  and  defence  of 
the  commonwealth  any  one  year,  will  not  purchase  its  protec- 
tion, security,  and  defence  for  the  year  to  come."     But  this  is 
plainly  an  error.     We  do  not  say  that  the  protection  and  security 
afforded  by  good  government  is  directly  a  cause  of  wealth  ;  but 
it  is  plain  that  without  this  security  and  protection,  the  produc- 
tive powers  of  industry  could  not  have  been  called  into  action. 
Dr.  Smith  would  allow  that  the  material  products   produced  by 
the  society  one  year,  were  to  form  the  means  of  producing  its 
supplies  of  necessaries,conveniencies,  and  enjoyments  during  the 

nish  it ;  and  hence  it  is,  that  comparative  indolence  and  comparative  ig;no- 
rance  never  can  succeed  in  any  business  or  profession.  The  unskilful 
farmer,  the  negligent  lawyer,  and  the  indolent  merchant,  are  soon  distan- 
ced in  the  race  of  competition,^— they  are  undersold  in  the  market,  by  the 
skilful,  the  attentive,  and  the  diligent.  They  complain  of  fortune  or  fa- 
vour, but  the  cause  lies  within  themselves.  They  are  parsimonious  with- 
out being  economical,  and  busy  witliout  being  industrious, — they  are  ex- 
travagant in  that  wliich  is  of  more  value  in  business  than  money,  of  time, 
order,  and  punctuality,— thus  it  is  that  fortune  and  favour,  the  servants  of 
merit,  desert  them,  business  declines,  friends  fall  away,  debts  increase,  and 
ruin  ensues. — E. 

21 


Itjtj  POLITICAL    ECONOMY. 

Consurap-  following  year.  But  without  the  security  and  protection  afforded 
WeaWi.  by  government,  these  products  would  either  have  not  existed  at 
all,  or  their  quantity  would  have  been  very  greatly  diminished. 
How,  then,  is  it  possible  to  deny  that  those  whose  labour  is 
necessary  to  afford  this  security  are  productively  employed  ? 
Take  the  case  of  the  labourers  employed  to  construct  fences  ; 
no  one  ever  presumed  to  doubt  that  their  labour  is  productive  ; 
and  yet  they  do  not  contribute  directly  to  the  production  of  corn 
or  of  any  other  valuable  product.  The  object  of  their  industry 
is  to  give  protection  and  security  ;  to  guard  the  fields  that  have 
been  fertihzed  and  planted  by  the  husbandman  from  depredation  ; 
and  to  enable  him  to  prosecute  his  employments  without  having 
his  attention  distracted  by  the  care  of  watching.  But  if  the  se- 
curity and  protection  afforded  by  the  hedger  and  ditcher  justly 
entitle  them  to  be  classed  among  those  who  contribute  to  enrich 
their  country,  on  what  principle  can  we  reckon  those  public 
servants  whose  exertions  protect  property  in  the  mass,  and  ren- 
der every  portion  of  it  secure  against  hostile  aggression,  and  the 
attacks  of  thieves  and  plunderers,  be  said  to  be  unproductive  ? 
If  the  labourers  who  protect  a  single  corn  field  from  the  neigh- 
bouring crows  and  cattle  be  productive^  then  surely  the  judges 
and  magistrates,  the  soldiers  and  sailors,  who  protect  every  field 
in  the  empire,  and  to  whom  it  is  owing  that  every  class  of  in- 
habitants feel  secure  in  the  enjoyment  of  their  property,  rights, 
and  privileges,  have  a  right  to  be  classed  among  those  whose  ser- 
vices are  supereminently  productive.* 

*  There  is  a  force  and  precision  in  this  illustration  of  our  author's  which 
goes  beyond  direct  argument,  and  may  almost  be  regarded  as  settling  the 
qu-estion  :  it  breaks  down  the  barrier  line  of  distinction  on  which  the  fol- 
lowers of  Adam  Smith  mainly  depended,  namely,  the  distinction  between 
labour  directly  and  indirectly  productive. 

If  any  distinction  be  drawn  between  the  labour  of  the  different  classes 
of  the  community,  it  should  be  founded,  not  on  the  accidental  and  tempo- 
raty  union  with  master  of  the  utility  in  which  alone  the  real  wealth  con- 
sists, but  in  the  consideration  of  the  object  that  is  aimed  at.  The  labour 
which  society  sets  in  motion  is  with  a  double  object, — with  a  view  either 
to  accumulation,  or  to  enjoyment.  To  the  former  portion  will  belong,  not 
merely  that  labour  which  is  occupied  upon  material  production,  but  also 
all  that  which  has  reference  to  the  means  of  accumulation,  of  whatsoever 
kind  or  nature  it  may  be.  To  the  latter  will  be  referred  all  of  wliich  in- 
dividual enjoyment  is  the  object  and  motive, 

A  house  servant  (to  take  the  case  so  often  quoted)  may  fall  under  either 
of  these  divisions.  If  hired  to  enable  his  master  to  give  more  time  to  his 
business,  he  is  to  be  ranked  in  the  first  division, — hired  to  give  his  master 
leisure  for  indolent  enjoyment,  he  falls  under  the  second. 

Still,  however,  these  divisions  are  not  to  be  distinguished  as  productive 
or  unproductive,  since  the  desire  of  enjoyment  is  the  only  final  end  for 
which  accumulation  is  sought :  they  admit,  however,  of  a  well  founded 
distinction  in  being  regarded,  the  former  as  directly,  the  latter  as  indirectly, 
productive.  This  determines  their  nature  but  not  their  comparative  im- 
portance :  that  is  to  be  settled  by  the  tVee  demand  of  a  well  organized  com- 
munity. So  far,  however,  in  this  they  difler,  that  the  former  never  can 
become  unproductive  except  from  ignorance  or  error,  the  latter  is  always 
liable  to  become  so  if  not  regulated  by  prudence  and  a  sense  of  duty. 

Here  then  lies  the  great  distinction  between  the  two  classes  of  labour, — 
an  over  consumption  of  either  is  equally  injurious  to  a  man's  fortune  ;  he 
may  be  ruined  by  a  needless  number  of  workmen  as  surely  as  by  a  need- 
less number  of  servants ;  but  against  the  former  self-interest,  directed  by 
^kill,  is  a  sufficient  security;  while  against  the  latter  error  he  is  obliged  to 
keep  up  all  those  checks  of  reason  and  prudence,  by  which  alone  men  are 
prevented  from  falling  into  indolence  and  luxurious  eniovment. — K- 


POLITICAL    ECONOMY.  lt)7 

That  much  wealth  has  been  unproductively  consumed  by  the  Consump- 
aervants  of  the  pubHc,  both  in  this  and  other  countries,  it  is  im-^vcaith. 
possible  to  doubt.  But  we  are  not  to  argue  from  the  abuses  ex- 
trinsic to  a  beneficial  institution  against  the  institution  itself.  If 
the  public  pay  their  servants  excessive  salaries,  or  employ  /i 
greater  number  than  is  required  for  the  purposes  of  good  govern- 
ment and  security,  it  is  their  own  fault.  Their  conduct  is  quite 
the  same  as  that  of  a  manufacturer  who  should  pay  his  labourers 
comparatively  high  wages,  and  employ  more  of  them  than  he 
had  occasion  for.  But,  although  a  state  or  an  individual  may  act 
in  this  foolish  and  extravagant  manner,  it  would  obviously  be  the 
extreme  of  folly  and  absurdity  to  conclude  from  thence  that  all. 
public  servants  and  all  manufacturing  labourers  are  unproduc- 
tive !  If  the  establishments  which  provide  security  and  protec- 
tion be  formed  on  an  extravagant  scale,  if  we  have  more  judges 
or  magistrates,  more  soldiers  or  sailors,  than  are  necessary,  or  if 
we  pay  them  larger  salaries  than  would  suffice  to  procure  the 
services  of  others,  let  their  numbers  and  their  salaries  be  re- 
duced. The  excess,  if  there  be  any,  is  not  a  fault  inherent  in 
the  nature  of  such  estabUshments,  but  results  entirely  from  the 
extravagant  scale  on  which  they  have  been  arranged.* 

But,  in  showing  that  Dr.  Smith  was  mistaken  in  considering  the  consump- 
consumption  of  menial  servants,  and  of  lawyers,  physicians,  and  n°t\obf' ' 
public  functionaries   unproductive,   we  must  beware  of  falling  encouragfd 

f  ,  ...  ^      c  i.  •  j.\  Jor  the  sake 

into  the  opposite  extreme,  and  ot  countenancing  the  erroneous  of  stimuia- 
and  infinitely  more  dangerous  doctrine  of  those  who  contend  that  Jjj^s  i'roduc- 
consumption,  even  when  most  unproductive,  ought  to  be  encou- 
raged as  a  means  of  stimulating  production,  and  of  increasing  the 
demand  for  labour  !  The  consumption  of  the  classes  mentioned 
by  Dr.  Smith  is  advantageous,  because  they  render  services  in 
return,  which  those  who  employ  them,  and  who  are  the  only 
proper  judges  in  such  a  case,  consider  to  be  of  greater  value 
than  the  wages  they  pay  them.  But  the  case  would  be  totally 
different,  if  the  Government  and  those  who  employ  labourers 
were  to  do  so,  not  in  order  to  profit  by  their  services,  but  to 
stimulate  production  by  their  consumption  ?  It  is  a  fallacy  and 
an  absurdity  to  suppose  that  production  can  ever  be  encouraged 
by  a  wasteful  consumption  of  the  products  of  industry.  A  man 
is  stimulated  to  produce  when  he  finds  a  ready  market  for  the 
produce  of  his  labour,  that  is,  when  he  can  readily  exchange 
them  for  other  products.  Jlnd  •hence  the  true  and  only  encourage- 
ment of  industry  consists,  not  in  the  increase  of  Tscastefd  and^im- 

*  In  the  expenditure  of  government  as  in  that  of  individuals,  there  may- 
he  a  false  economy  as  well  as  a  direct  extravagance.  Salaries  may  be  too 
low  as  well  as  too  high  for  the  public  good.  If  a  manufacturer  should  se- 
lect his  materials,  his  machines,  and  his  workmen,  for  their  cheapness,  and 
not  for  their  goodness  and  skill,  the  imperfections  of  the  work  would  soon 
prove  him  to  have  mistaken  his  real  interest,  and  the  path  of  true  econo- 
my. In  like  manner  a  government  is  to  be  esteemed  prodigal  instead  ot 
saving,  if  it  buys  in  public  stations  a  grade  of  talent,  of  professional  learn- 
ing, or  of  character,  inferior  to  the  services  that  are  demanded.  The  true 
principle  is,  that  only  is  cheap  which  is  well  done : — a  principle  equally 
applicable  to  personal  services  as  to  material  products,  and  showing  the 
economy  of  a  nation  in  its  government,  like  that  of  a  manufacturer  in  his 
establishment,  or  of  an  individual  in  his  family  expenditure,  to  consist,  not 


lij'6 


J'OLITICAL    ECONOMY. 


f'onsunip- 
•  ion  of 
Wealth. 


Unproduc- 
tive Con- 
siuniption 
not  neces- 
sary to  pre- 
vent Gluts. 


provident  consumption,  but  in  the  increase  oj  production.'^  Every 
new  product  necessarily  forms  a  new  equivalent,  or  a  new  means 
of  purchasing  some  other  product.  It  must  always  be  remem- 
bered, that  the  mere  existence  of  a  demand,  how  intense  soever 
it  may  be,  cannot  of  itself  be  a  means  of  encouraging  production. 
'I*o  become  a  real  demander,  a  man  must  not  only  have  the  will, 
but  he  must  also  have  the  jjoreer,  to  purchase  the  commodity  he 
wishes  to  possess  ;  or,  in  other  words,  he  must  be  able  to  offer 
an  equivalent  for  it.  There  never  has  been,  nor  is  it  in  the  na- 
ture of  things  that  there  ever  can  be,  any  limits  to  our  wish  to 
possess  the  products  of  art  and  industry.  It  is  the  power  to  give 
effect  to  our  wishes,  or  to  furnish  other  products  in  exchange 
for  those  we  are  desirous  of  obtaining,  that  is  the  real  and  only 
desideratum.  The  more,  therefore,  that  this  power  is  increased, 
that  is,  the  more  industrious  every  individual  becomes,  his  means 
of  offering  equivalents  for  the  products  of  others  will  be  so  much 
the  more  increased,  and  the  market  will  be  rendered  so  much 
the  more  extensive. 

Mr.  Sismondi  and  Mr.  Malthus  have,  indeed,  contended,  in 
opposition  to  this  doctrine,  that  the  productiveness  of  industry 
may  really  be  carried  to  excess  ;  and  that,  in  a  country  where 
there  are  great  facilities  of  production,  a  large  unproductive 
consumption  is  necessary  to  stimulate  industry,  and  prevent  the 
overloading  of  the  market.!     But  if  we  attend  to  the  motives 


ill  the  cheapness,  but  in  the  goodness  of  that  which  it  consumes, — in  cut- 
ting off  expenditure,  not  so  much  in  the  payment  of  the  services  of  inte- 
grity and  talent, — as  in  the  consequences  of  ignorance,  error,  and  abuse  of 
trust. 

In  illustration  of  this  principle  may  be  mentioned,  the  corrupt  state  of 
the  French  judiciary  before  the  Revolution.  The  places  of  the  judges 
being  bought  from  the  government,  the  salary  became  little  more  than  an 
interest  on  an  invested  capital.  This  left  them  without  other  return  for 
their  personal  services  than  the  corrupt  influence  of  their  judicial  station ; 
society  thus  being  made  to  pay  in  the  perversion  of  justice,  a  thousand-fold 
lor  the  pitiful  savings  of  the  government.  See  Say,  Book  III.  ch.  6. — E. 

*  From  the  error  opposed  to  this  principle,  individuals  are  saved  by  the 
all-powerful  operation  of  self-interest ;  but  with  governments  there  is  no 
such  check,  and  their  expenditure  is  very  apt  to  be  regarded  as  a  public 
benefit ;  as  exciting  industry  by  the  demand  it  creates  for  products,  and 
thus  circulating  money  throughout  the  community.  On  these  principles 
Voltaire  defended  the  enormous  expenditure  of  Louis  XIV.  in  the  erection 
of  royal  palaces;  and  Frederick  II.  with  equal  truth,  congiatulated  the 
nation  upon  his  expensive  and_  fruitless  wars.  Sounder  principles  enable 
us  now  to  perceive  that  public  expenditure  is  to  be  tested,  like  private, 
solely  by  the  utility  of  the  result. — E. 

t  Whatever  may  be  thought  of  this  principle,  in  relation  to  such  a 
country  as  England,  it  is  altogether  inapplicable  to  us.  So  long  as  we  in 
America  have  forests  to  subdue  and  canals  to  open,  there  can  be  no  injuri- 
ous surplus  of  capital,  labour,  or  commodities.  The  gradual  improvement 
of  the  country  will  absorb,  for  centuries  to  come,  all  that  is  redundant,  and 
population  increasing  in  the  same  ratio  as  the  means  of  support,  be  con- 
stantly affording  a  wider  market  and  more  varied  consumption.    . 

With  what  rapidity  the  domestic  market  of  the  United  States  is  increas- 
ing, will  be  best  seen  by  an  abstract  from  the  decennial  returns  of  its  po- 
pulation, beginning  with  the  year  1790 : — 

Total  population  of  the  United  States  in  1790,  3,929,328  inhabitants, 
do  do  do  1800,  5,306,035         do 

do  do  do  1810,  7,239,903         do 

do  do  do  1820,  9.625.731         dq 


POLITICAL  ECONOMY.  1613 

which  cause  men  to  engage  in  any  branch  of  industry,  we  shall  Congump- 
be  satisfied  that  the  apprehensions  of  these  writers  are  unfound-  wedth. 
ed,  and  that  the  utmost  facility  of  production  can  never  be  pro- 
ductive of  a  permanent*  glut  of  the  market,  or  require  to  be 
counteracted  by  means  of  unproductive  expenditure.  In  exert- 
ing his  productive  powers,  every  man's  object  is  either  directly 
to  consume  the  produce  of  liis  labour  himself,  or  to  exchange  it 
for  such  commodities  as  he  wishes  to  obtain  from  others  :  If  he 
does  the  first — if  he  directly  consumes  the  produce  of  his  indus- 
try, there  is  an  end  of  the  matter,  and  it  is  evident  that  the  mul- 
tiplication of  such  produce  to  infinity  could  never  occasion  a  glut : 
If  he  does  the  second — if  he  brings  the  produce  of  his  industry 
to  market,  and  offers  it  in  exchange  for  other  commodities,  then, 
and  then  only,  there  may  be  glut ;  but  why  ?  Not  certainly  be- 
cause there  has  been  any  excess  of  production,  but  because  the 
producers  have  not  properly  adapted  their  means  to  their  ends. 
They  wanted,  for  example,  to  obtain  silks,  and  they  offered  col- 
tons  in  exchange  for  them  ;  the  proprietors  of  the  silks  were, 
however,  already  sufficiently  supplied  with  cottons,  and  they 
wanted  broad  cloths.  The  cause  of  the  glut  is,  therefore,  ob- 
vious. It  consists  not  in  over-production,  but  in  the  production 
of  cottons,  which  were  not  wanted,  instead  of  broad  cloths, 
%vhich  were  wanted.  Let  this  error  be  rectified,  and  the  glut 
will  disappear.  Even  supposing  the  proprietors  of  silks  to  be 
not  only  supplied  with  cottons,  but  with  cloth,  and  every  other 
commodity  that  the  demanders  can  produce,  it  would  not  invali- 
date the  principle  for  which  we  are  contending.  If  those  who 
want  silks  cannot  obtain  them  from  those  who  have  them,  by 
means  of  an  exchange,  they  have  an  obvious  resource  at  hand — 
let  them  cease  to  produce  the  commodities  which  they  do  not 
want,  and  directly  produce  the  silks  which  they  do  want,  or  sub- 
stitutes for  them.*    It  is  plain,  therefore,  that  the  utmost  facility 

Giving  a  rate  of  increase  during  the  intervening  periods  of  ten  years, 
From  1790  to  1800  of    35.1  per  cent. 
1800  to  1810  of    34.6 
1810  to  1820  of    32.9 
In  the  period  of  twenty  years, 

From  1790  to  1810  of  85  per  cent,  nearlv 
1800  to  1820  of  82 
In  the  whole  period  of  thirty  years, 

From  1790  to  1820  of  145  per  cent. 
It  is  this  rapidly  increasing  population  which  gives  life  to  the  producti\  e 
industry  of  our  country.  And  will  long  avert  from  us  the  evils  of  a  perma- 
nently overloaded  market. — E. 

*  This  doctrine  of  our  author  appears  to  the  Editor  untenable,  if  confi- 
ned, as  he  appears  to  confine  it,  to  tlie  products  of  labour.  The  remedy  he 
here  lays  down  relates,  not  to  a  general,  but  a  partial  glut ;  and  is,  besides, 
a  very  impracticable  one.  Against  partial  gluts  there  is,  in  the  nature  of 
things,  an  obvious  remedy.  No  man  will  be  contented  with  low  profits 
while  his  neighbour  is  realizing  higher ;  and  the  competition  of  capitalists 
will  thus  adjust  the  applications  of  it,  so  as  to  correct  in  the  speediest 
manner  possible,  all  deviations  from  the  average  rate  of  profit. 

But  the  question  now  is,  whether  there  cannot  be  a  surplus  of  all  pro- 
ducts so  as  to  cause  a  universal  glut ;  reducing  at  once  rent  of  land,  wages 
of  labour,  and  profits  of  capital.  The  answer  to  this  question  depends  on 
the  extent  given  to  the  universality  asserted.  If  it  exclude  labour,  there 
certainly  may  be  a  glut  of  all  products  in  relation  to  it,  and  the  rise  of  wa- 
ges will  necessarily  produce  a  general  and  equivalent  fall  of  profits.     BvA 


170 


POLITICAL    ECONOMY. 


Consump- 
tion of 
Wealth. 


ot'  production  can  never  be  a  means  of  overloading  the  niarketJ 
Too  much  of  one  commodity  may  occasionally  be  produced  j 
but  it  is  quite  impossible  that  there  can  be  too  great  a  supply  of 
every  species  of  commodities.  For  every  excess  there  must 
be  a  correspondmg  deficiency.  The  fault  is  not  in  producing 
too  much,  but  in  producing  commodities  which  do  not  suit  the 
tastes  of  those  with  whom  we  wish  to  exchange  them,  or  which 
we  cannot  ourselves  consume,  if  we  attend  to  these  two  grand 
requisites,  we  may  increase  the  power  of  production  a  thou- 
sand or  a  million  of  times,  and  we  shall  be  as  free  of  all  excess 
as  if  we  diminished  it  in  the  same  proportion.  Unproductive 
consumption  is  not,  therefore,  necessary  to  prevent  the  over- 
loading of  the  market ;  and  to  maintain  that  it  contributes  to  in- 
crease national  wealth  in  any  other  way,  is  really  just  the  same 
thing  as  to  maintain  that  wealth  would  be  increased  by  throwing 
a  portion  of  it  into  the  sea  or  the  lire.* 


if  it  include  jiopulation,  so  that  wages  and  profits  continue  to  bear  to  each 
otlier  the  same  ratio,  there  cannot,  in  the  natural  course  of  things,  be  such 
a  state  as  a  general  glut ;  for  if  all  the  elements  of  which  society  consist, 
continue  to  bear  to  each  other  the  same  proportion,  no  derangement  can 
take  place. 

But  in  this,  as  in  other  cases,  the  wise  provisions  of  nature  are  defeated 
ty  the  being  for  whose  benefit  they  are  intended  :  a  state  of  war  is  a  state 
contrary  to  nature,  and  hostile  to  national  prosperity ;  it  disturbs  the  natu- 
ral proportions  that  subsist  between  the  production  and  consumption  of  so- 
ciety. War,  by  turning  citizens  into  soldiers,  turns  producers  into  consu- 
mers, and  hence  its  temporary  stimulus  upon  markets  and  prices.  After 
a  ^time,  however,  this  excitement  ceases,  and  production  is,  by  degrees, 
accommodated  to  the  demand  of  these  surplus  consumers.  A  return  to 
peace  reverses  this  order  of  things ;  by  converting  soldiers  into  labourers 
it  turns  consumers  into  producers,  and  brings  on,  consequently,  a  general 
glut  and  stagnation  of  trade.  That  such  a  state  is  possible,  of  a  general 
stagnation  in  which  all  are  the  sufferers,  and  that  it  is  consequent  upon  the 
change  from  war  to  peace,  no  one  will  deny  who  has  attended  to  the  gene- 
ral state  both  of  Europe  and  America,  since  the  late  war.  Years  of  lan- 
guishment  and  wild  speculation  have  been  found  to  be  an  after  tax,  which 
a  country  must  pay  for  "  that  game,  which,  if  subjects  were  wise,  kings 
should  not  play  at."  War  is  in  itself  a  state  so  hostile  to  the  best  interests 
of  society  as  to  leave,  as  it  were,  an  entail  of  curses  behind  it.  A  general 
glut,  therefore,  while  it  may  be  considered  as  inconsistent  with  the  princi- 
ples of  the  science,  which  presupposes  a  state  of  peace,  is  yet  liable  to  exist 
wherever  a  sudden  and  general  change  takes  place  in  the  ratio  of  produc- 
tion and  consumption,  increasing  the  former  and  diminishmg  the  latter, 
which  is  always  the  case  on  a  return  from  war  to  peace. 

As  to  the  remedy  for  such  a  state  of  distress,  it  must  be  found,  not  in  le- 
gislative provisions  or  unproductive  consumption,  but  in  individual  indus- 
try and  economy ;  which  will  restore  to  a  healthy  state  in  the  shortest  time 
possible,  consistent  with  the  nature  of  the  disease,  the  deranged  functions 
of  the  body  politic. — E. 

*  M.  Say  was  the  first  who  showed,  in  a  satisfactory  manner,  that  effec- 
tive demand  depends  upon  production.  (See  his  chapter  De  Debouches.) 
But  the  principles  from  which  his  conclusions  are  drawn  had  been  stated 
£0  early  as  1752,  in  a  tract  of  Dean  Tucker's,  entitled  Queries  on  the  late 
.Yaturalisation  Bill.  As  this  tract  is  now  become  of  rare  occurrence,  we 
rhall  subjoin  the  queries  referred  to. 

"  Whether  it  is  possible,  in  the  nature  of  things,  for  all  trades  and  pro- 
fessions to  be  overstocked  ?  And  whether,  if  you  were  to  remove  any  pro- 
portional number  from  each  calling,  the  remainder  would  not  have  tlie  same 
grounds  of  complaint  they  had  before  ? 

"  Whether,  in  fact,  any  tradesman  tliinks  there  are  too  many  of  other 
■occupations  to  become  his  customers ;  though  narrow  selfish  vie^vs  lead 
Ixim  to  wish  there  were  fewer  of  his  own  trade  ^ 


POLITICAL  ECONOMY.  HI 

Montesquieu  has  said,  and  the  same  sentiment  has  been  ex-  Con8umi>- 
pressed  in  a  thousand  different  shapes,  "  Si  les  riches  ne  depen-  wcauh.  * 
sent  pas   heaucoup  les  pauvres  mourront  defaiin.^^'^     (Liv.  VII.  ^ 

chap.  4.)  Montesquieu  was  betrayed  into  this  error,  from  his  Montesquieu. 
being  unacquainted  with  the  nature  and  functions  of  capital. 
The  profusion  of  the  rich,  far  from  being  of  any  advantage  to 
the  poor,  is  really  one  of  the  greatest  calamities  that  can  befal 
them.  It  is  impossible  that  the  demand  for  labour  can  be  in- 
creased without  an  increase  of  capital.  When  the  parsimonious 
principle  predominates,  capital  increases,  and  as  capital  in- 
creases, the  demand  for  labour  is  increased,  the  existing  inhabi- 
tants are  better  provided  for,  and  their  numbers  are  increased  ; 
on  the  contrary,  wherever  profusion  and  wasteful  expenditure 
predominates,  capital  is  diminished,  the  inhabitants  are  daily- 
worse  and  worse  provided  for,  and  idleness,  pauperism,  and  dis- 
ease prevail.  Besides,  it  must  be  remembered,  that  what  is 
annually  saved,  is  as  regularly  consumed  as  what  is  annually 
spent.  The  only  difference  is,  that  it  is  consumed  in  a  different 
manner — consumed  by  those  who  render  a  greater  value  in  re- 
turn, instead  of  being  consumed  by  such  as  render  no  real  value 
whatever.! 

"  By  what  a  frugal  man  annually  saves,"  says  Dr.  Smith,  "  he 
not  only  affords  maintenance  to  an  additional  number  of  labour- 
ers for  that  or  the  ensuing  year,  but,  like  the  founder  of  a  pub- 
lic workhouse,  he  establishes,  as  it  were,  a  perpetual  fund  for 
the  maintenance  of  an  equal  number  in  all  time  to  come.  The 
perpetual  allotment  and  destination  of  this  fund,  indeed,  is  not 
always  guarded  by  any  positive  law,  by  any  trust-right,  or  deed 
of  mortmain.  It  is  always  guarded,  however,  by  a  very  power- 
ful principle,  the  plain  and  evident  interest  of  every  individual 
to  whom  any  share  of  it  shall  ever  belong.  No  part  of  it  can 
afterward  be  employed  to  maintain  any  but  productive  hands, 
without  an  evident  loss  to  the  person  who  thus  perverts  it  from 
its  proper  destination."     (^Wealth  of  JVations,  11.  p.  14.) 

We  have  already  stated  the  impossibility  of  laying  down  any 
general  rules  on  the  subject  of  individual  consumption.  What 
the  public  is  really  interested  in  is,  that  it  should  never  be  car- 
ried on  for  the  absurd  purpose  of  occasioning  a  demand  for  the 
products  of  industry,  and  that  it  should  be  less  than  the  repro- 
duction ;  or,  in  other  words,  that  the  capital  of  the  country 
should  be  kept  constantly  on  the  increase.  But  there  is  no  in- 
stance of  any  people  having  ever  missed  an  opportunity  to  save 
and  accumulate.     And  in  all  tolerably  well  governed  countries 

"  If  a  particular  trade  be  at  any  time  overstocked,  will  not  the  disease 
cure  itself  ?  That  is,  will  not  some  persons  take  to  other  ti-ades,  and  fewer 
young  people  be  bred  up  to  that  which  is  least  profitable  ?  And  whether 
any  other  remedy  but  this  is  not,  in  fact,  curing  one  transient  disorder  bi/ 
bringing  on  many  which  are  dangerous^  and  will  grow  inveterate  ? 

"Whether  it  is  not  aj»  infallible  maxim,  that  one  man's  la- 
bour creates   EMPLOYMENT  FOR  ANOTHER  ?    (p.  13.) 

For  a  further  demonstration  of  the  same  principle,  see  Mr.  Mills's  Com- 
rnerce  Defended,  p.  80. 

*  "  The  economy  of  the  rich  starves  the  poor." — E. 

t  For  a  further  and  very  able  discussion  of  the  opinion  of  Montesquieu, 
see  the  7th  chapter  of  the  Commentaire  sur  V  Esprit  des  Loix  of  M.  De- 
stutt-Tracy,  and  Tom.  IV.  p.  383,  of  the  Ekmcns  rf'  Ideologic  of  the  sara* 
author. 


172 


POLITICAL    ECONOMY. 


ConBump- 
tion  of 
Wealth. 


ConBump- 
tion  of  Go- 
vernment. 


the  principle  of  accumulation  in  individuals  has  always  had  u 
marked  ascendancy  over  the  principle  of  expense,  and  the  na- 
tional capital,  and,  consequently,  the  riches  of  the  country,  have 
heen  constantly  augmented. 

But  this  is  seldom  the  case  with  the  consumption  carried  on 
by  goverments  and  their  servants.*  Individuals  are  fully  sensible 

*  With  the  sound  principles  maintained  by  our  author,  it  is  to  be  re- 
gi'etted  that  he  had  not  somewhat  enlarged  on  the  subject  of  the  consump- 
tion of  government,  which  forms  one  of  the  most  ample  and  practically 
important  divisions  of  the  science,  embracing  all  questions  relating  to  the 
nature  and  influence  of  government  expenditure,  and  the  sources  whence 
it  is  be  derived  with  the  least  injury  to  the  interests  of  the  community. 
An  outline  of  these  may  serve  to  excite  inquiry  ou  the  part  of  the  student 
and  direct  him  to  further  sources  of  information. 

The  fundamental  principle  upon  which  this  subject  rests  is  that  the  ex- 
penditure of  government  is  unproductive,  except  in  so  far  as  the  security 
and  happiness  of  society  is  the  result. 

What  government  really  consumes,  is  not  the  money  wliich  it  takes  from 
the  community,  for  that  is  returned — nor  the  provisions  and  equipments  it 
demands,  for  they  are  paid  for — but  it  consists  in  the  time,  talents,  and  per- 
sonal services  of  those  whom  it  employs,  and  who  otherwise  would  furnish 
to  society  an  equivalent  for  their  support. 

The  means  by  which  governments  have  met  this  expenditure,  have  va- 
ried with  the  progress  of  society. 

1.  In  ancient  times  by  the  accumulation  of  treasure.  This  mode  was 
doubly  injurious.  First,  by  withdrawing  from  society  a  portion  of  its  pro- 
ductive capital — and  secondly,  in  rendering  government  tyrannical,  by  ma- 
king them  independent  of  the  public  purse. 

2.  By  taxes.  In  this  improved  mode  of  supplying  the  needs  of  govern- 
ment, money  is  taken  only  when  needed,  and  consequently  has  this  advan- 
tage of  leaving  capital  productively  employed  until  it  is  wanted. 

The  definition  of  a  tax,  is  the  portion  of  income  which  a  man  pays  in  re- 
turn for  the  protection  of  government.  If  it  goes  beyond  income  and 
trenches  upon  principal,  it  is  fatal  to  accumulation,  and  reacts  to  its  own 
diminution.  If  levied  upon  capital,  it  is  unjust — a  case  exemplified  in 
taxes  upon  wild  lands — a  capital  unproductive,  not  through  the  will  of  the 
holder,  but  of  necessity. 

The  nature  of  a  tax,  is,  that  it  is  withdrawn  from  society  without  equi- 
valent. The  money  returns,  but  it  is  in  exchange  for  a  second  value.  See 
Hamilton  on  The  JVational  Debt  of  Gieat  Britain.  Say,  Vol.  II.  Note, 
p.  201. 

The  object  of  a  tax,  is  solely  the  support  of  government,  its  influence  on 
national  properity  being  always  injurious. 

The  subject  of  taxation  is,  however  disguised,  the  income  of  indivi- 
iluals,  the  commodity  on  which  it  is  imposed,  being  but  an  equitable  mode 
of  assessing  them. 

The  form  of  a  tax,  may  be  either  direct  or  indirect — direct  when  impo- 
sed on  the  individual — indirect  when  levied  on  the  commodity.  A  direct 
tax  is  more  certain  in  its  returns,  but  more  invidious  in  its  operation.  An 
indirect  tax  is  comparatively  voluntary,  but  doubtful  in  its  returns.  Say, 
Vol.  II.  p.  265.     Ricardo,  ch.  8,  9,  &c. 

The  effect  of  taxation,  when  light,  is  a  drawback — when  heavy,  is  u 
i>urse,  being  equivalent  to  a  sterile  soil,  or  a  bad  harvest,  or  any  other  ca- 
lamity which  adds  to  the  costs  of  production.  For  the  definite  influence 
it  exerts,  according  as  it  is  imposed  on  raw  produce,  rent,  profits,  or  wages, 
see  Ricardo  as  above  ;  Mills,  ch.  4,  sect.  5,  6,  &c.;  Adam  Smith,  Book  IV. 
th.  2,  part  2. 

Among  the  criteria  which  may  be  adopted  for  testing  tlie  compara- 
tive preference  that  should  be  given  in  a  choice  among  various  taxes,  the 
following  may  be  mentioned. 

1.  The  lowest  in  amount  is  to  be  preferred — tliis  arises  from  its  very  na- 
ture, which  is  unproductive  expenditure. 

2.  The  cheapest  in  collecting,  for  what  is  so  spent,  is  utterly  lost,  both  to 
individuals  and  to  the  public.     As  an  illustration  of  a  tax  unfavourable 


POLITICAL  ECONOMY*  173 


of  the  value  of  the  articles  they  expend.     In  the  vast  majority  Consump- 
of  instances,  they  are  the  direct  result  of  their  industry,  perse-  weaUh 
verance,  and  economy  ;  and  they  will  not  consume  them,  unless 
to  obtain  an  equivalent  advantage.     But  such  is  not  the  situation 

upon  this  principle,  may  be  mentioned,  the  ordinary  road  tax  of  our  state 
as  worked 'OUt  by  the  individuals  assessed.  What  society  pays,  is  the 
value  of  SO  many  good  day's  labour — what  society  receives,  is  the  loitering^ 
■work  of  unpaid  workmen  ;  the  difl'erence  between  them  is,  in  this  tax,  the 
cost  of  levying. 

3.  Which  falls  on  luxuries  rather  than  on  necessaries — the  former  raises 
the  price  of  the  article  alone,  on  which  it  is  laid — the  latter,  operating 
tlirough  the  wages  of  labour,  eitlier  raises  the  price  of  all  commodities,  or 
lowers  the  profits  of  all  capital. 

4.  Which  are  most  favourable  to  good  morals. 

Among  the  instances  of  the  reverse,  may  be  mentioned  lotteries  ;  a  tax 
which,  although  voluntarily  paid,  is  yet  most  injurious  in  its  results. 
Under  the  new  constitution  of  our  state,  they  are  for  ever  excluded,  and 
justly,  since  they  offend  against  every  principle  of  a  wise  tax.  Their  con- 
tinuance, however,  in  other  parts  of  our  country,  justifies  a  few  words  in 
explanation  of  their  nature  and  influence.  A  lottery  is  a  tax  which  is  ex- 
pensive in  collecting — of  what  society  pays,  not  one  fiftieth  goes  into  the 
treasury.  All  the  time  that  is  wasted,  and  money  that  is  squandered,  and 
vicious  habits  that  are  formed,  by  the  deluded  adventurers  in  this  licenced 
gambling,  is  to  be  added  as  part  of  the  expense  of  collecting  in  addition  to 
the  direct  costs. 

It  is  a  tax  which  falls  principally  on  the  poor  and  necessitous.  This 
class  of  society  is  most  allured  by  the  prospect  of  gain  without  labour,  and 
least  able  to  judge  of  the  delusiveness  of  the  scheme.  They,  therefore, 
are  the  largest  contributors. 

It  is  a  tax  which  is  based  upon  the  passions  and  vices  of  man — is  a  direct 
bounty  upon  gambling — an  indirect  one  upon  idleness,  and  teaches  to  all 
a  lesson  most  fatal  to  individual  success,  and  most  injurious  to  national 
wealth — that  of  looking  to  fortune  for  bettering  the  condition,  instead  of 
industry  and  economy. 

On  this  subject,  see  Say,  Book  III.  ch.  8.  Ricardo,  for  a  modified  de- 
fence of  the  influence  of  taxation,  Principles,  Slc.  ch.  8.  Weallh  of  J\'a- 
iions.  Book  V.  ch.  2. 

The  third  and  latest  method  of  supplying  the  exigencies  of  government, 
is  by  means  of  voluntary  loans.  In  which  government  is  the  borrower, 
monied  men  the  lenders,  and  society  the  payers. 

The  advantages  attending  this  mode  of  meeting  public  exigencies,  arise 
from  the  facility,  rapidity,  and  certainty  with  which  large  sums  can  be  rais- 
ed in  a  moment  of  exigency.  • 

The  disadvantages,  or  rather  the  dangers  to  be  dreaded  from  them,  flow 
from  these  same  causes.  A  loan  is  an  operation  in  which  no  man  feels  his 
rights  invaded;  hence  it  removes,  from  the  expenditure  of  government 
that  wholesome  check  of  public  feeling,  which  operates  upon  it  when  its 
means  are  drawn  from  taxation. 

The  nature,  history,  and  operation  of  government  loans,  constitute  a 
large  and  important  branch  of  this  science. 

A  public  loan,  in  its  nature,  is  a  tax,  like  all  other  revenue  of  govern- 
ment. It  is  not  recognized  as  such,  because  it  is  not  presently  paid ;  third 
persons,  that  is,  the  capitalists  of  society  coming  forward  in  the  mean  time 
to  advance  the  amount,  until  it  shall  be  convenient  for  the  community  to 
pay  it,  and  receiving  in  the  mean  time  a  certain  interest,  which  in  the 
form  of  a  tax,  is  immediately  levied  upon  society. 

The  operation  of  a  loan,  is  for  a  time,  to  diffuse  that  air  of  wealth  and 
prosperity  which  always  arises  from  increased  expenditure  ;  its  permanent 
effect  is  to  cripple  the  energies  of  the  nation.  A  certain  poi-tion  of  its  ca- 
pital lutherto  productive  in  the  hands  of  individuals,  has  been  unproduc- 
tively  consumed  by  the  government,  and  posterity  is  burthened  with  the 
repayment  of  it  to  those  who  originally  advanced  it,  or  to  those  who  have 
chosen  to  stand  in  their  places. 

In  the  older  governments  of  Europe,  tlie  repayment  of  the  principal  is 
generally  abandoned,  and  the  interest  payable  forms  a  permanent  annual 


174  POLITICAL   ECONOMV. 

consump-  of  govemmcnts.  They  consume  the  produce  of  the  laboor  o-t" 
Vve^ti).  others,  not  of  their  own  ;  and  this  circumstance  prevents  them 
from  being  so  much  interested  in  its  profitable  expenditure,  and 
go  much  ahve  to  the  injurious  consequences  of  extravagant  and 
wasteful  expenditure  as  their  subjects.  But  economy  on  the 
part  of  government,  though  more  difficult  to  be  obtained,  is  of 
infinitely  greater  importance  than  economy  on  the  part  of  any 
individual.  Should  a  private  gentleman  think  of  acting  on  the 
principle  that  profusion  is  a  virtue,  and  that  industry  may  be  en- 
couraged by  increasing  unprofitable  consumption,  he  will  most 
certainly  be  ruined  ;  his  ruin,  however,  will  only  be  directly  in- 
jurious to  the  individuals  in  his  own  employment,  and  will  have 
but  a  very  slight  indirect  effect  on  others.  But  similar  conduct 
on  the  part  of  government  would  most  probably  be  productive 
either  of  revolution,  or  of  national  poverty  and  degradation.  If, 
then,  it  is  most  desirable  that  individuals  should  have  a  correct 
knowledge  of  their  real  interest  in  the  consumption  of  commo- 
dities ;  how  much  more  so  must  it  be  that  goverment  should  pos- 
sess that  knowledge  ?  Economy  and  frugality  are  virtues  in  a 
private  station  ;  but  in  a  public  station  their  influence  upon  na- 
tional happiness  is  so  vast,  that  they  are  not  only  the  first  of  vir- 
tues, but  the  most  pressing  of  duties. 

addition  to  the  oi-dinary  taxes.  It  would  seem  at  first  sight  to  make  a  very 
material  difference  whether  the  loan  is  to  be  repaid  or  not,  but  in  truth,  so 
tar  as  regards  the  general  progress  of  national  wealth,  it  is  a  matter  of 
perfect  indifference.  The  original  capital  that  government  expended,  has 
been  altogether  consumed,  and  can  never  by  any  process  be  replaced ;  fu- 
ture economy  may  provide  a  substitute,  but  the  original  values,  like  food 
consumed,  have  been  utterly  destroyed. 

If  it  is  ever  paid,  society  pays  it  out  of  the  capital  or  income  of  indivi- 
duals, and  the  only  change  it  produces  is  this — while  it  remains  unpaid, 
the  community  at  large  hold  and  employ  the  principal,  the  stockholders  re- 
ceive and  employ  the  interest — when  paid,  the  principal  itself  is  trans- 
ferred to  the  stockholders,  and  seeks  a  new  investment. 

According  to  this  view  of  tlie  subject,  the  various  provisions  adopted  for 
the  purpose  of  repaj'^ment,  under  the  title  of  sinking  funds  are  nugatory, 
or  rather  injurious,  since  they  burthen  society  with  the  furtlier  expenses 
incidental  on  this  mock  form  of  payment.  These  views  will  be  found  in 
Hamilton  on  "  The  Kaiional  Debt  of  Great  Britain.''''  Lowe's  Present 
atate  of  England.  See  also.  Review  of  Hamilton  in  the  Edinburgh  Re- 
view, No.  48,  art.  3  ;  of  Boyd  on  Finance,  No.  50,  art  13,  No.  78,  art.  1 ; 
and  in  the  Quarterly  Review,  National  Debt,  Vol.  XII.  p.  431,  No.  53, 
art.  11,  No.  62,  art.  2;  Ravenstone  on  the  Funding  System. 

Of  our  own  country,  the  public  debt  though  the  same  in  principle  with 
that  of  England,  is  yet  so  different  both  in  amount  and  in  proportion  to  our 
means  of  repayment,  as  to  remove  from  it  much  of  the  reasoning  of  the 
writers  referred  to.  For  its  detailed  history,  see  Seybert's  Statistics,  chap- 
ter Public  Debt.  The  outline  of  it  is  as  follows  : 
Originating  in  the  debts  contracted  by  Congress  during  the 

Revolutionary  war,  the   Public  Debt  of  the   United 

States  amounted  in  1791,  to $75,169,974 

Expenses  of  the  war  of  1812,  raised  it  in  1816,  to    -         -    123,016,375 
Reduced  in  1821,  to 91,294,416 

This  debt,  though  larger  in  amount,  is  much  lighter  in  reality,  that  is,  in 
proportion  to  the  population  and  resources  of  the  country  now,  than  it  was 
in  1791. 

In  1791,  it  gave  to  every  inhabitant  the  sum  of        -         -         $23  25 

1821, -         -         -  11  28 

Being  reduced,  compared  with  our  means,  to  less  than  one  half. 

The  debt  of  Great  Britain  gives  to  each  individual  of  the  kingdom  as 
his  share  of  the  debt,  about  $175,  and  to  each  family  more  than  $1000. — E. 


rOLITICAL  ECONOMV.  175 

-'  Si  les  depenses  publiques,"  M.  Say  observes,  "  aifectent  la  Consump- 
•5omme  des  richesses  pr^cis«'ment  de  la  mOnie  maniere  que  les  wcaui'. 
depenses  privces,  les  rnumes  principes  d'econoniie  doivent  pre-  ^ —     „ 

•1  /  *  J/     'f  11  4      jY         Opinion  of 

sider  aux  unes  et  aux  autres.  11  n  y  a  pas  plus  deux  soiies  a  eco-  ji.  Say. 
nomie,  qxCil  n'y  a  deux  sortes  de  probile,  deux  sortes  de  morale. 
Si  un  gouvernerncnt  comme  un  particuHor  font  dcs  consoniina- 
tions  desquelles  il  doive  I'esulter  une  production  de  valeur  supc- 
rieure  a  la  valeur  consomme,  ils  exercent  une  Industrie  produc- 
tive ;  si  la  valeur  consomme  n'a  laisso  aucnn  produit,  c'est  une 
valeur  perdue  pour  I'une  comme  pour  I'autre,  mais  qui  en  se 
dissipant,  a  fort  bion  pu  rendrc  le  service  qu'on  en  attendait.  Les 
munitions  de  guerre  et  de  bouche,  le  terns  et  les  travaux  de  fonc- 
tionnaires  civils  et  militaires  qui  ont  sorvi  a  la  defense  de  I'etat, 
n'existent  plus,  quoique  ayant  ttt;  parl'aitement  bien  employes, 
il  en  est  des  ces  choses  comme  des  denrees  et  des  services  qu'une 
famille  a  consommes  pour  son  usage.  Get  emploi  n'a  presentee 
aucun  avantage  autre  que  la  satisfaction  d'un  besoin  ;  si  le  besoin 
n'existoit  pas,  la  consommation,  la  depense,  n'ont  plus  ete  qu'un 
mal  sans  compensation.  II  en  est  de  meme  des  consommations 
de  I'etat ; — consommer  pour  consommer,  depcnser  par  systeme, 
reclamer  une  service  pour  I'avantage  de  lui  accorder  une  salaire, 
auneantir  une  chose  pour  avoir  occasion  de  la  payer  est  une  ex- 
travagance de  la  part  d'un  gouvernement  comme  de  la  part  d'na 
particulier,  dans  un  'petit  etat  comme  dans  un  grand,  dans  une 
republique  comme  dans  un  monarchie.  Un  gouvei-nement  dis- 
sipateur  est  meme  bien  plus  coupable  qu'un  particulier :  celui  ci 
consomme  les  products,  qui  lui  appartiennent  tandis  qu'un  gou- 
vernement n'est  pas  proprietaire  :  il  n'est  qu'administrateurde  la, 
fortune  publique."*     (Tome  II.  p.  268.) 


We  have  now  shown  how  labour  may  be  rendered  most  pro-  Conclusion. 
ductive  of  wealth — how  that  wealth  is  distributed  among  the  va- 
rious classes  of  the  society — and  how  it  may  be  most  advanta- 
geously consumed.     We  have  shown  the  close  and  indissoluble 

*  If  public  expenditure  affect  the  sum  of  national  riches  precisely  in 
the  same  manner  as  private  expenditure,  the  same  principles  of  economy 
should  preside  over  both.  There  are  no  more  two  sorts  of  economy  than, 
there  are  two  sorts  of  honesty  or  morality.  If  from  the  consumption  of  go- 
vernment there  arise,  as  from  that  of  an  individual,  the  production  of  a 
superior  value  to  that  which  is  consujiied,  then  government  exercises  pro- 
ductive industry ;  if  the  value  consumed  has  left  no  product,  it  is  a  value 
destroyed  in  the  one  case  as  in  the  other  ;  the  consumption  of  which,  how- 
ever, may  have  perfectly  answered  the  ends  proposed  by  it.  The  military 
stores  and  provisions,  the  time  and  labours  of  public  functionaries,  civil 
and  military,  which,  after  serving  for  the  defence  of  the  nation,  no  longer 
exist,  yet  having  been  perfectly  well  applied,  is  an  expense  that  stands  on 
the  same  footing  as  that  by  which  a  family  is  supported.  This  is  an  ex- 
penditure that  presents  no  other  advantage  than  the  supply  of  a  certain 
want;  if  the  want  existed  not,  the  consumption  and  expense  is  an  evil 
without  compensation.  It  is  precisely  the  same  with  the  consumption  of 
the  state — to  consume  for  consumption's  sake — to  spend  upon  system — to 
invent  an  office,  lor  the  purpose  of  giving  a  salary — to  destroy  a  value,  iti 
order  to  have  occasion  to  pay  for  it,  is  the  same  extravagance  and  folly  on 
the  part  of  a  government  as  of  an  individual,  in  a  small  state  as  in  a  great 
one,  in  a  republic  as  in  a  monarchy.  A  government  in  its  waste,  is  even 
more  culpable  than  an  individual ;  he  but  consumes  the  products  that  be- 
long to  him, 'while  government  is  only  the  administrator,  not  the  owner 
of  the«public  fortune.'"— E. 


176  POLITICAL    ECONOMY. 

Conciusiou.  connexion  subsisting  between  private  and  public  opulence,  and 
that  whatever  has  any  tendency  to  increase  the  former,  naust,  to 
the  same  extent,  increase  the  latter  ; — and  we  have  shown  that 

SECURITY  OF  PROPERTY,  FREEDOM  OF  INDUSTRV,  AND  MODERATION 

IN  THE  PUBLIC  EXPENDITURE,  are  the  only,  as  they  are  the  cer- 
tain, means  by  which  the  various  powers  and  resources  of  human 
talent  and  ingenuity  can  be  called  into  action,  and  society  made 
continually  to  advance  in  the  career  of  wealth  and  civilization. 
Every  increase  of  security  or  of  freedom  is  a  benefit,  as  every  di- 
minution, whether  of  the  one  or  the  other,  is  an  evil.  It  is  by  the 
spontaneous  and  unconstrained  efforts  of  individuals  to  improve 
their  condition  and  to  rise  in  the  world,  and  by  these  efforts  only, 
that  nations  become  rich  and  powerful.  The  labour  and  the  sa- 
vings of  individuals  are  at  once  the  source  and  the  measure  of 
national  opulence  and  public  prosperity.  They  may  be  com- 
pared to  the  drops  of  dew  which  invigorate  and  mature  all  vege- 
table nature.  None  of  them  has  singly  any  perceptible  influ- 
ence ;  but  we  owe  the  foliage  of  summer  and  the  fruits  of  autumn 
to  their  combined  action.  (s.  s.) 

The  foregoing  notes,  having  been  prepared  for  the  printer  as  the  work 
progressed,  the  Editor  is  conscious,  on  now  reviewing  them,  that  they  lie 
open  to  the  charge  of  occasional  obscurity  from  want  of  detail,  and  tedious- 
ness  from  unnecessary  repetition. 

He  believes,  however,  that  they  will  be  found  to  be  sound  in  principle 
and  correct  in  statement,  and  trusts  that  the  references  they  contain  to  fur- 
ther sources  of  information  may  tend  to  lessen  the  labour  of  the  student, 
and  favour  the  formation  of  liberal  and  independent  opinions. 

Among  the  omitted  references  which  may  add  interest  or  clearness  to 
the  subjects  discussed,  may  be  added  the  following: 

In  connexion  with  note  p.  44,  on  Economical  Science  in  America,  the 
early  American  pamphlets,  will  be  found  noticed  in  the  first  five  volumes 
of  the  North  American  Review.  Two  early  tracts  on  Banking,  published 
in  Boston  in  1714  and  1720,  are  particularly  worthy  of  being  consulted. 
A  notice  of  Pownal's  administratoin,  will  also  be  found,  Vol.  V.  At  a  la- 
ter period,  Mr.  Jefferson's  Reports  and  Essays  deserve  a  fuller  reference'; 
they  contain  the  principles  of  the  liberal  system  of  national  practice,  though 
often  symbolizing  in  theory  with  the  narrow  views  of  the  French  econo- 
mists. Raymond's  recent  work  on  Political  Economy,  Baltimore,  1820, 
demands  notice,  as  strongly  marked  by  sound  and  good  feeling,  but  dia- 
metrically opposed  to  the  principles  of  Adam  Smith  and  Ricardo..  This 
work  is  ably  reviewed  in  the  North  American  Review,  No.  31. 

To  the  note  on  Banking,  p.  75,  may  be  added  the  following  : 

The  article  Banking  in  the  supplement  to  the  Encyclopedia  Britannica, 
Pucardo  on  Bullion;  Reviewed,  in  the  Quarterly,  Vol.  XXV.  Huskisson 
on  Depreciation  of  Currency,  Edmburgh  Review  Vol.  XVII.  p.  339,  Vol. 
XVIII.  p.  470  ;  Reviewed  in  the  Quarterly,  Vol.  IV.  p.  414,  Vol.  XVI.  p. 
225.  On  Bank  Restriction,  Quarterly  Review,  Vol.  III.  p.  158,  Vol.  XII. 
p.  429 ;  and  an  able  review  of  Tracts  on  Money,  Edinburgh  Review,  No. 
70,  art.  11. 

To  the  note  relative  to  Farming  in  America,  p.  123,  see  North  Ameri- 
ran  Review,  Skinner's  Amerimn  Farmer.  No.  14,  art.  4. 


POLITICAL  FXONOMY.  177 


in  order  to  show  the  relative  bearing  and  connexion  of  the  various 
subjects  comprehended  within  this  science,  the  Editor  has  thought 
well  to  add  the  following  analytic  arrangement  of  them. 

SUMMARY. 

Political  Economy  is  the  science  that  relates  to  the  nature 
and  causes  of  the  wealth  of  nations. 

Definitions. 

1.  Wealth — Utility  which  is  the  result  of  labour,  or  whatever 
possesses  exchangeable  value. 

f?.  J^ational  Wealth — the  sum  of  the  wealth  of  the  indivi- 
duals that  compose  the  nation. 

3.  The  Nature  of  the  Wealth  of  jYations — is,  therefore,  the 

same  with  that  of  individuals, — governed  by  the  same 
laws  and  to  be  increased  from  the  same  sources,  viz.  In- 
dustry and  Economy. 

4.  The  Causes  of  National  Wealth — are  to  be  found  in  the  fa- 

cihties  given  to  individual  acquisition.  These  are  great- 
est where  industry,  enterprise,  and  capital,  are  left  free, 
with  two  exceptions  : 

1.  Where  the  public  safety  or  interest  is  jeopardized  by 

the  individual. 

2.  Where  the  public  morals  are  the  sacrifice  at  which  his 

gains  are  made. 

The  science  of  Political  Economy  consists  in  analyzing  the 
phenomena  which  wealth  exhibits. 

1.  In  its  PRODUCTION, 

2.  DISTRIBUTION, 

3.  EXCHANGES, 

4.  CONSUMPTION. 

Of  these  Production  and  Consumption  are  in  their  nature  the 
most  important, — Production  forming  the  immediate  and  Con- 
sumption the  final  end  of  all  human  labour.  Distribution  and 
Exchanges  are  but  intermediate  means,  and  valuable  only  in  re- 
ference to  the  former  two, — Distribution  having  reference  to 
Production  and  being  governed  by  the  law  of  equity.  Exchan- 
ges having  reference  to  Consumption  and  being  governed  by  the 
law  of  convenience. 

I.  PRODUCTION.— Under  this  first  head  the  leading  considera- 
tions are, — 

1.  The  nature 

2.  The  variety  ^  ^^  Production. 

3.  The  agents 

4.  The  stimulants 

1.  Nature. — Production  has  reference  to  utility,  not  to 
matter, — utility  given  or  increased  by  means  of  hu- 
man labour,  either  bodily  or  mental,  constitutes  a 
product. 


178  POLITICAL    ECONOMY. 

2.  Variety. — This  exists  in  form,  not  in  nature.    The  na- 

ture of  Production  in  all  its  forms  is,  labour  creating 
utility.  Its  forms  are  indefinitely  varied,  but  may  be 
arranged  under  the  three  following  classes  : 

1.  The  obtaining  of  raw  produce. — This  includes  labour 

on  land,  and  in  lisheries,  and  mines,  and  using  the 
term  in  a  wide  sense,  may  be  styled  Agricultural. 

2.  The  giving  to  raw  produce  thus  obtained  a  new  value 

by  some  change  of  form, — this  is  Manufacturing. 

3.  The  adding  a  further  value  to  the  values  thus  given 

by  change  of  place,  or  more  correctly,  by  bringing 
the  product  from  the  producer  to  the  hands  of  the 
consumer, — this  form  of  production  bears  the  name 
of  Commercial. 
This  classitication  is  convenient  for  reference  but  dan- 
gerous in  reasoning,  as  tending  to  lead  the  economist  to 
the  false  inference,  of  divided  or  opposite  interests  among 
the  diiferent  classes  of  the  community. 

3.  Agents. — The  agents  of  Production  may  be  reduced  tu 

three.  * 

1.  Labour,  or  the  primary  agent, 

r>    Canital  ) 

o'  XT  f^      i'  *       i     ?  secondary  agents,  or  aids  to  labour. 

3.  Natural  Agents,  ^  j    &        ' 

1.  Labour  the  original  and  primary  agent  of  all  Produc- 

tion. 
In  nature, 

1.  Manual,  yielding   material   products,   as  grain, 

cloth,  &c. 

2.  Mental,  yielding  immaterial  products,  as  skill, 

science,  Lc. 
In  subdivision, 

1.  Territorial,    or   that   subdivision  of  labour  on 

which  national  exchanges  rest,  and  which  adds 
to  the  common  mass  of  wealth,  by  consulting 
the  facilities  of  national  Production. 

2.  Individual,  or  that  subdivision  of  labour  on  which 

the  internal  exchange^ 'of  a  community  are 
founded,  and  which  add§  to  the  wealth  of  soci- 
ety by  the  increased  skill  and  economy  of  time 
which  result  from  such  division. 

2.  Capital,  second  in  point  of  time  to  labour,  but  equally 

ctBcient  with  it,  as  an  agent  of  Production. 

In  nature, — it  is  the  accumulated  products  of  anterior 
labour. 

In  form,- -it  is  indefinitely  varied.  While  the  real  ca- 
pital is  invariable,  consisting  always  in  the  utility 
or  exchangeable  value  of  that  which  is  employed, 
•  the  form  under  which  it  appears,  as  that  of  mo- 

ney, materials,  &.c.  is  a  matter,  incidental,  varia- 
ble, and  unimportant. 

In  its  services, — it  increases  the  power  of  unaided 
labour : 


rOLlTICAT.    ECONOMV.  1T9 

1.  By  supporting  its  subdivisions  through  the  means 

of  surphjs  food,  m;iterials,  &c.  in  vyhich  state  it 
is  termed  circulating  capital. 

2.  By  providing  buildings  and  introducing  machine- 

ry, and  thus  appropriated  it  is  termed  Jixed  ca- 
pital. 
3.  JVatural   agents   or   the    elements   of  nature   which 
through  the  agency  of  capital  are  made  to  work 
for  man.     Tliis  they  do  : 

1.  By  performing  services   peculiar,  and   otherwise 

unattainable,  as  land  in  producing,  tire  in  melt- 
ing, &.C. 

2.  By  performing  attainable  services  but  at  a  cheaper 

rate,  being  used  merely  as  a  substitute  for  animal 
or  human  power,  as  water,  wind,  or  steam,  used 
as  moving   powers,   and  exemplified   in  canals, 
mills,  and  steam  engines. 
The  means  by  which  the  natural  agent  is  applied  to 

Production  and  controlled  in  its  operation  constitutes  a 

machine,     ftlachines  are  : 

1.  Simple, — as  mechanical  tools,  the  saw,  plough,  &c. 

2.  Complex, — as  mills  and  steam  engines. 

The  influence  of  labour-saving  machinery  upon  the 
working  class  is, — 

1 .  Temporary  embarrassment  by  the  numbers  thrown 

out  of  employ. 

2.  Eventual  benefit  by  the  diminished  cost  of  the  pro- 

duct. 
4.  Stimulants. — The  stimulants  to  Production  are  two : — ■ 

1.  The  desire  of  accumulation. 

2.  The  desire  of  enjoyment. 

The  conditions  under  which  these  operate  most  effectu- 
ally are, — 

1.  Secure  possession  to  the  individual  of  the  fruits  of 

his  industry. 

2.  Perfect  freedom  in  the  direction  of  it. 

Beyond  these  all  stimulants  on  the  part  of  the  govern- 
ment are  partial,  unjust,  and  injurious. 

II.  DISTRIBUTION.— The  second  great  division  of  the  science, 

embraces  the  laws  which  regulate  the  Distribution  of  that 

common  mass  of  products  which  arise  from  the  union  of 

labour,  capital,  and  natural  agents. 

The  law  of  Distribution  is  this, — products  are  divided  among 

the  productive  classes  of  the  community  in  proportion  to  the 

productive  services  they  have  respectively  contributed. 

From  the  three  agents  of  Production  arises,  consequently,  a 
threefold  division  of  those  products  which  are  the  result  of 
their  combination,  viz : 

1.   The  share  of  Labour,  which  is  termed  Wages, 
2. Capital, Interest, 

3.  '• Natural  Agents, Rent. 

All  who  live  in  society  self-supported,  derive  their  income 
from  one  or  other  of  these  sources,  which  therefore  divide?  the 
community  into  the  three  great  classes  of. 


180  POLITICAL    tCONOMV. 

1.  The  industrious  class  who  live  on  wages,  and  exer- 

cise an  industry  either  bodily  or  mental. 

2.  The  capitalists  who  live  on  interest.     This  supposes 

them  to  loan  out  their  capital,  otherwise  their  returns 
will  also  include  the  wages  of  personal  service. 

3.  Landholders,  &c.  who  live  on  rent. 

Of  these  each  is  governed  by  its  own  laws,  and  dependant  as 
to  its  numbers  and  increase,  on  the  age,  state,  and  progress,  of 
society. 

1.  Wages — or  the  share  of  labour.     Those  who  receive 

it  constitute  the  industrious  class, — it  is  an  equivalent 
for  personal  services,  whether  mental  or  corporeal. 
This  class,  consequently,  comprehends  all  magistrates, 
professional  and  scientitic  men,  artists,  men  of  skill, 
and  the  whole  body  of  ordinary  labourers. 
Of  these,  the  laws  which  regulate  the  last,  or  the  body 
of  ordinary  labourers,  are  the  most  complex  and 
important. 
Under  the  term  "  wages  of  labour"  things  essentially 
different  may  be  meant, — it  may  mean, 

1.  Money  Wages ^ — this  is  merely  nominal. 

2.  Proportional  Wages, — this  determines  proportional 

profits,  or  the  comparative  situation  of  the  la- 
bourer and  the  capitalist. 

3.  Real  Wages^ — or  the  values  received.    This  alone 

regulates  the  comlbrts  of  the  poor,  and  the  gene- 
ral prosperity  of  society. 

Wages  are  equitably  equal  to  all  classes  of  workmen. 

The  causes  of  apparent  inequfJlity  are  the  considerations 
of  comparative  ease,  skill,  danger,  certainty,  repu- 
tation, &c. 

The  principle  is,  that  men  are  to  be  paid  for  that  which 
they  sacrifice,  whether  it  be  time,  health,  comfort, 
money,  or  reputation. 

2.  Interest, — or  the  share  of  capital.     This  is  received 

from  money  lent, — when  employed  by  the  owner  him- 
self, the  returns  of  capital,  under  the  name  of  profits, 
include  two  things, — 

1 .  Interest  on  the  capital  employed,  which  is  always  at 

an  average  rate  throughout  a  country. 

2.  Wages  for  the  personal  services  required  in  the  busi- 

.  ness, — these  vary  according  to  the  laws  which  re- 
gulate wages. 

Interest  of  money  lent  is  divisible  into  two  portions. 

\.  That  portion  which  represents  the  value  of  the  capi- 
tal, or  the  real  use  of  the  money  lent.  This  por- 
tion rises  and  falls  with  the  profits  to  be  made  from 
it,— varying, 

1 .  Temporarily,  with  the  demand  and  supply  of  dis- 

posable capital. 

2.  Permanently,  sinking  with  a  gradual  fall  in  the  pro- 

gress of  society,  arising  from  the  diminished  rc- 
Inrns  of  capital  invested  in  agriculture. 


POLITICAL   ECONOMY.  181 

2.  That  portion  which  represents  the  chance  of  loss, 
and  which  may  therefore  be  termed  a  premium  of 
risk.     This  risk  is  threefold  : 

1 .  Of  character  in  the  borrower, 

2.  Of  business  in  which  it  is  employed, 

3.  Of  interference  of  government. 

This  last,  in  regular  governments,  appears  in  the 
shape  of  laws  regulating  interest,  which  form  a 
perfectly  gratuitous  artificial  impediment,  and  one. 
which  the  good  sense  of  society  will  soon  discard. 

3.  Rent, — or  the  share  corresponding  to  the  services  of 
the  natural  agents  employed. 

Rent  appertains  to  those  natural  agents  only  which  pos- 
sess locality,  and  which,  consequently,  vary  in  power 
and  are  limited  in  quantity.  It  arises  from  the  power 
of  appropriation,  and  is  the  measure  of  the  surplus 
production  of  the  superior  qualities  over  those  last 
brought  into  use. 

In  all  other  natural  agents,  viz.  such  as  are  equal  and 
unlimited,  no  rent  is  paid,  the  application  of  them  to 
the  purposes  of  production,  being  simply  a  matter  of 
capital, — their  cost  is  the  interest  of  the  machinery 
requisite. 

Rent  has  in  no  case  any  influence  on  the  price  of  com- 
modities, being  the  effect  and  not  the  cause  of  its  ele- 
vation. 

The  natural  price  of  raw  produce  is  the  cost  of  its  pro- 
duction from  land  that  pays  no  rent. 

HI.  EXCHANGES. — The  third  great  division  of  tlie  science  re- 
lates to  the  law  of  Exchanges.  The  distribution  of  pro- 
ducts is  a  matter  of  right, — their  Exchange  is  a  matter  of 
convenience.  In  extent — it  comprehends  a  large  class  of 
society,  viz.  all  who  stand  between  the  producer  and  the 
consumer.     In  mode — it  is  twofold  : 

1 .  By  barter,  which  was  the  original  mode,  and  still  forms 

the  essential  principle  of  exchanges. 

2.  By  a  medium  of  exchange,  or  monev- 
Under  this  head  are  to  be  considered, — 

1.  The  nature  of  money, 

2.  Its  services. 

1 .  Nature. — The  money  of  society  is  of  a  double  nature  : 

1.  Metallic,  or  that  which  has  its  value  within  itself,  and 

appears  as  coin. 

2.  Paper,  or  that  which  is  representative  of  value,  and 

appears  under  the  form  of  "promissory  notes  and 

other  varieties  of  credit. 

These' two  agree  in  the  services  which  they  perform. 

but  differ  in  the  laws  by  which  they  are  regulated. 

1.  Metallic  money,  from  its  having  intrinsic  value,  is 

a  commodity  of  commerce  as  well  as  a  medium  of 

exchange, — it  consequently  regulates  itself,  and 

requires  no  legal  provisions  as  to  its  quantity. 


la.^  rOLITICAL    ECONOMY. 

^mission,  or  exportation.  Under  a  tree  trade,  a 
nation  will  have  what  it  wants,  and  will  retain  no 
more. 

2.  Paper  money,  or  tliat  which  is  but  representative 
of  value.  This  is  a  cheaper  machine  than  me- 
tallic coin,  answering  the  same  end  but  more  li- 
able to  derangement. 

Having  no  value  in  itself  it  is  not  a  commodity  of  com- 
merce. An  artificial  market  must,  therefore,  be 
kept  open  at  home,  to  absorb  a  surplus  whenever 
such  takes  place. 

That  market  is  the  government  or  bank  that  issues  it, 
while  this  is  open,  freely  exchanging  paper  for 
real  value,  paper  like  metallic  money  will  regu- 
late itself  as  to  quantity,  by  the  demands  of  soci- 
ety, and  can  never  be  greater  than  its  needs. 
2.  The  Services  of  money. — The  costs  of  production,  or 
the  values  for  which  articles  are  exchanged  when 
estimated  in  money,  are  termed  price. 
Price  is  of  two  kinds, — 

1.  Regulating,  or  natural  price, — this  is  determined 

by  the  costs  of  production,  and  rises  or  falls 
with  their  increase  or  diminution. 

2.  Actual,  or  market  price, — this  is  governed  by  de- 

mand and  supply,  being  directly  as  the  former 
and  inversely  as  the  latter. 
Market  price  may  be  again  considered  as, — 

1,  Nominal,  as  estimated  in  money:  from  the  chan- 

ges of  this  we  learn  only  the  comparative  plen- 
ty or  scarcity  of  the  medium  of  exchange. 

2.  Real,  as  estimated  in  other  commodities, — from 

the  changes  of  this  we  learn  the  comparative 
plenty  or  scarcity  of  the  article  itself. 
Rent  being  excluded  from  price  it  is  divisible  into  two 
portions. 

1.  Wages,  which  repays  the  labourer.     This  por- 

tion is  always  advanced  by  the  capitalist,  and 
the  residue  of  price  after  this  is  abstracted 
constitutes, 

2.  Profits,  which  remains  to  the  capitalist,  a  return 

for  his  capital  and  personal  services. 
Hence,  a  rise  of  wages  is  equivalent  to  a  fall  of  pro- 
fits, and  a  fall  of  wages  to  a  rise  of  profits. 

IV.  CONSUMPTION.— The  last  division  of  the  science  conipre- 
hends  an  examination  into  the  laws  which  regulate  the  con- 
sumption of  products  ;  under  this  head  are  to  be  consi-  • 
dered — 

1.  The  nature      \ 

2.  The  extent      fen  *• 

o    rr.1       ,  •     i      >  of  Consumption. 

3.  The  object      C  * 

4.  The  agents     j 

1.  Nature. — Consumption  is  the  reverse  of  production,  be- 
ing the  destruction  of  that  value,  the  giving  of  which 
ronstitnted  production. 


POLITICAL    KCO.VOMV.  183 

^.  Extent. — Consumption  is  coextensive  with  production. 
Exportation  being  the  mode  by  which  a  country  con- 
sumes whatever  is  surplus  over  its  domestic  demands. 

3,  Object. — The  object  of  consumption  is  twofold. 

1.  Reproductive  with  a  view  to  a  greater  return. 

2.  Unproductive  for  the  convenience  or  gratification  be- 

stowed. 
On  the  proportion  which  these  two  bear  to  each  other 
depends  the  progress  or  decline  of  wealth,  whether  in- 
dividual or  national  ;  if  equal,  capital  remains  statioa- 
ary — if  unproductive  exceeds,  it  is  diminished — if  repro- 
ductive, it  is  increased. 

4.  Agents. — The  agents  of  consumption  are  likewise  two 

fold. 

1 .  Individuals. — These  consume  products  both  material 

as  food,  clothes,  &c.,  and  immaterial  as  personal 
services,  skill,  &;c. 

2.  Government. — This  consumes  products  solely  imma- 

terial, as  the  time  and  services  of  those  it  employs. 

The  consumption  of  government  is  that  by  which  the 

body  politic  is  supported,  and  like  the  sustentationof  the 

natural  body  is  unproductive  in  its  nature,  and  redeemed 

only  by  the  value  of  its  results.     Hence  a  wise  economy 

is  the  true  policy  of  all  governments. 

The  interference  of  government  with  individual  rights  and 

freedom  is  an  evil  which  is  to  be  limited  by  the  necessity  on 

which  it  is  founded — it  relates  to, 

1.  Individual  gains. — As  in  taxation,  which  is  unjust  and 
tyrannical  except  in  so  far  as  it  is  necessary  to  the 
great  ends  for  which  government  is  established,  viz. 
the  peace  and  good  order  of  the  community.     Taxa- 
tion, therefore,  is  to  be  hmited  by  that  necessity.     It 
is  justifiable  only  with  a  view  to  revenue. 
2.  Individual  enterprise. — The  interference  of  govern- 
ment with  the  industry  and  capital  of  individuals  ma\' 
be  ranked  under  the  tbllowing  heads. 
1.  Production. — Government  seeks  to  regulate  produc- 
tion by, 
1.  Monopolies — the  eflect  of  these  is  jnvariably  to 
elevate  and  sustain  market  price  above  the  natu- 
ral price  of  the  article  which  forms  the   sub- 
ject of  the  monopoly,  and  thus  to  burthen  society 
with  needless  expenses. 
These  are  reducible  to, 

1.  Private  monopolies  or  patent  rights — justifiable 

only  when  they  are  an  equivalent  or  purchase 
on  the  part  of  the  public  of  the  natural  and 
equitable  rights  of  the  discoverer  or  inventor 
of  that  which  is  patented. 

2.  Trading  companies — these,  however  justifiable 

in  early  times,  are  altogether  injurious  where 
capital,  knowledge,  and  enterprise  abound. 


/ 


18-1  POLITICAL    ECONOMY. 

3,  Colonial  monopolies — a  narrow  and  unwise  po- 

licy, equally  unfavourable  to  the  advancement 
of  the  colony  and  of  the  mother  country. 

4.  Banking  companies — as  these  are  generally  con- 

stituted, they  arc  doubly  prejudicial  to  the  in- 
terests of  society. 

1.  In  adding  to  the  cost  of  that  which  is  to  be 

effected,  the  premium  of  a  monopoly  price. 

2.  In  opening  a  door  to  fraud  and  collusion,  by  li- 

miting the  responsibility  of  those  concerned, 
and  thus  striking  at  the  root  of  public  pros- 
perity by  impairing  the  validity  of  contracts. 
The  objects  proposed  by  these  chartered  com- 
panies, would  be  more  safely  and  cheaply  attained 
by  voluntary  associations  of  capitalists  individu- 
ally responsible. 
".'.  Regulating  Duties. — These  are  imposed  by  govern- 
ment, with  a  view  to  direct  the  enterprise  and  capi- 
tal of  the  nation  into  certain  channels,  into  which 
they  would  not  otherwise  run. 
Except  in  reference  to  public  morals  or  national  de- 
fence, these  are  unwise  and  impolitic  ;  for  if  no  indivi- 
dual in  the  nation  be  a  gainer  by  being  thus  controlled, 
it  is  evident  that  neither  can  the  public  be  a  gainer,  for  it 
consists  of  none  other  than  those  very  individuals  ;  a  sum 
total  of  private  loss,  can  never  constitute  a  public  gain. 
These  regulating  laws  appear  in  the  form  of, 

1.  Bounties  to  encourage  production  and  exportation  ; 

the  bounty,  though  paid  by  the  government  to  its 
own  subjects,  is  eventually  transferred  to  the  na- 
tion that  consumes ;  it  there  appears  in  the  shape 
of  reduced  prices. 

2.  Prohibitory  duties  to  restrain  importation  :    these 

operate  primarily  on  the  foreign  producer,  but 
eventually,   on   the   domestic   consumer — being 
equivalent  to  a  tax  levied  on  the  community,  to 
the  amount  of  the  difference  of  the  cost  of  pro- 
duction at  home  or  abroad,  and  paid  as  a  bounty 
to  the  domestic  producer,  to  enable  him  to  sup- 
port the  competition. 
These  regulating  laws  when  intended  to  meet  the  acts 
of  foreign  governments,  are  entitled  countervailing  du- 
ties ;  but  even  these  are   politic  only  as  an   offensive 
measure  directed  against  the  nation  that  imposes  the  re- 
straint, and  as  intended  to  drive  them  from  it.     While 
they  continue,  they  double  the  evils  felt  by  both  nations. 
3.  Distribution. — Government  interferes  with  the  national 
distribution  of  products,  by  the  compulsory  support 
of  certain  classes  of  the  community. 
1.  Of  the  officers  of  government. — The  very  nature  of 
government  requires  an  establishment — known  func- 
tionaries with  fixed  salarios. 


POLITICAL    ECONOMY.  IHo 

The  rule  of  wise  economy  prescribes  such  amount  of 
salary  as  may  purchase  the  grade  of  talent,  of  learning, 
and  of  character,  which  the  duties  of  the  station  de- 
mand. 

2.  Of  ministers  of  religion,  as  supported  by  tythes  or 

other  certain  revenues. — This  goes  upon  the  prin- 
ciple that  the  natural  sense  of  religion  is  insuffi- 
cient to  justify  their  being  left  to  the  voluntary  sup- 
port of  society. 
On  this  point,  the  experiment  made  by  the  United 
States  may  be  considered  as  conclusive  ;  it  has  settled 
principles   never   before  satisfactorily  tried.     Religion 
needs  no  state  patronage — the  state  needs  no  church 
establishment. 

3.  Of  the  poor. — That  poverty  will  ever  be  banished 

from  society,  is  one  of  the  dreams  of  enthusiasm  ; 

that  it  may  be  indefinitely  diminished,  is  the  rule 

and  the  motive  of  the  benevolent  economist.     To 

relieve  poverty  by  legal  provisions,  is  a  remedy 

that  has  always  been  found  to  scatter  more  widely 

the  seeds  of  pauperism. 

The  only  true  policy  is  to  seek  to  diminish  poverty 

by  removing  the  causes  of  it,  which  are  ignorance  and 

vice.     The  best  poor  laws  are  to  be  found  in, 

1 .  Provisions  for  the  education  of  the  poor  ;  as  cha- 

rity schools,  common  schools,  education  socie- 
ties, &c. 

2.  Restraints  upon  vice,  by  houses  of  refuge,  well  re- 

gulated penitentiaries,  and  a  strict  police  in  rela- 
tion to  all  the  resorts  of  intemperance. 
4.  Exchanges. — The  interference  of  government  in  the 
exchanges  of  society,  is  always  impolitic.  It  appears 
in  the  control  of  markets  and  the  regulation  of  prices, 
and  is  intended  to  guard  the  interests  of  certain  por- 
tions of  the  community  against  the  extortion  of  others, 
ft  may  be  instanced  in  the  regulation  of, 

1.  Wages — intended  to  guard  against  combinations  of 

workmen. 

2.  Profits — against  the  exorbitant  demands  of  traders. 

3.  Interest — against  the  extortion  of  money  lenders. 

The  limitation  of  these  by  law,  is  either  nugatory  or  un- 
just. When  the  labourer  is  free  in  his  person  and  in  his 
trade,  and  the  capitalist  is  unrestrained  in  his  investments, 
competition  will  always  reduce  wages,  profits,  and  interest 
to  their  lowest  equitable  rate. 

To  these  is  also  to  be  added, 

■1.  The  control  of  the  corn  market  by  laws  regulating 
the  opening  and  shutting  of  the  ports  for  its  impor- 
tation and  exportation. 
The  object  of  corn  laws  is  to  guard  against  a  scarcity  ; 
their  effect  is  rather  to  produce  one,  and  at  all  times  to 
burthen  corn  with  increased  costs  of  production. 
o.  Consumption. — The  interference  of  government  in  the 
consumption  of  products,  except  upon  moral  grounds. 


18t)  POLITICAL    ECONOMY. 

is  both  arbitrary  and  unfavourable  to  the  advance- 
ment of  wealth — it  appears  in, 

1.  Sumptuary  laws,  regulating  individual  expenditure — 

this  is  unfavourable,  as  it  robs  society  of  the  great 
stimulus  to  production. 

2.  Laws  of  moral  police — regulating  licences  and  impo- 

sing penalties  in  relation  to  the  consumption  of 
spirituous  liquors,  and  here  we  have  only  to  regret 
the  backwardness  of  government  in  using  so  spa- 
ringly, a  power  which  constitutes  no  small  portion 
of  the  moral  responsibility  that  is  attached  to  offi- 
cial station. 


CONCLUDING  REMARKS. 


In  concluding  the  notes  on  the  foregoing  Essay,  the  Editor 
would  indulge  the  hope,  that  the  present  publication  may  be  the 
means  of  exciting  others  to  the  task  of  elucidating  the  princi- 
ples of  this  science,  whose  leisure  may  enable  them  to  give  to 
the  subject,  that  fulness  and  correctness  unattainable  amid  the 
daily  labours  of  academical  duty,  and  whose  station  may  add 
weight  to  opinions  sound,  but  not  popular. 

They  are  opinions,  however,  which  are  destined  eventually 
to  triumph,  and  to  form  the  prosperity  and  pride  of  the  nation 
that  first  models  itself  upon  them.  The  language  of  Political 
Economy  is  the  language  of  reason  and  of  enlarged  experience, 
blinded  by  no  prejudices,  drawn  aside  by  no  private  motives, 
coloured  by  no  sectional  feelings,  but  holding  singly  and  steadily 
the  course  of  true  patriotism,  the  common  good  of  our  common 
country. 

Withotjt  incurring  the  charge  of  enthusiasm,  it  may  be  main- 
tained to  be  the  redeeming  science  of  modern  times — the  rege- 
nerating principle  that  in  connexion  with  the  spirit  of  Christian- 
ity, is  at  work  in  the  civilized  governments  of  the  world,  not  to 
revolutionize,  but  to  reform.  The  policy  which  it  prescribes 
is  a  safe  as  well  as  a  sound  one.  Upon  the  older  nations  of  Eu- 
rope it  imposes  the  obligation  of  removing,  but  with  a  caution 
proportioned  to  the  extent  and  duration  of  the  evil,  all  those 
barriers  which  an  unwise  policy  may  have  heretofore  establish- 
ed among  them,  against  the  progress  of  knowledge  and  the  ad- 
vancement of  wealth.  To  the  rising  governments  of  America, 
it  teaches  wisdom  by  European  experience  ;  and  to  all  nations 
it  facilitates  their  approach  to  that  undefinable  limit  of  the  per- 
fectibility of  man,  which  in  every  age  has  furnished  the  brightest 
visions  to  the  patriot  and  philanthropist,  and  the  strongest  mo- 
tives as  well  as  the  highest  reward  to  the  exertions  of  the  wise, 
the  benevolent,  and  the  good. 

The  high  principles  which  this  science  teaches,  entitle  it  to 
be  regarded  as  the  moral  instructor  of  nations.  To  them  that 
will  give  ear,  it  demonstrates  the  necessary  connexion  that  sub- 


POLITICAL   ECONOMY.  187 

sists  between  national  virtue,  national  interest,  and  national  hap- 
piness. 

It  is  to  states  what  religion  is  to  individuals,  the  "preacher  of 
righteousness" — what  religion  reproves  as  wrong,  Pohtical  Eco- 
nomy rejects  as  inexpedient — what  religion  condemns  as  contra- 
ry to  duty  and  virtue,  Political  Economy  proves  to  be  equally 
opposed  to  the  peace,  good  order,  and  permanent  prosperity  of 
the  community.  Thus  slave  labour  is  exploded  for  its  expen- 
siveness — non-intercourse  is  condemned  for  its  extravagance — 
privateering  for  its  waste  of  wealth — and  war  for  the  injury 
sustained  even  by  the  victor  ;  and  thus  freedom  of  person, 
friendly  intercourse  between  nations,  kindness  even  in  hostilities, 
and  if  possible  universal  peace,  which  are  the  highest  blessings 
as  well  as  the  greatest  virtues,  are  supported  by  the  all  power- 
ful considerations  of  self-interest. 

That  these  principles  will  ever  be  universall)'^  reduced  to 
practice,  is  a  hope  which  seems  to  be  forbidden  by  that  corrup- 
tion of  nature,  which  renders  necessary  the  restraints  of  go- 
vernment ;  but  there  is  nothing  either  in  nature  or  experience, 
that  forbids  the  expectation  of  an  indefinite  approximation  to 
them.  Principles  once  sown  propagate  themselves,  and  become 
rooted  in  the  mind  in  proportion  as  they  harmonize  with  the 
common  sense  of  mankind.  Sound  principles  of  national  po- 
licy, adopted  by  individuals,  will  gradually  operate  upon  go- 
vernment, and  more  especially  upon  a  government  that  emanates 
firom  the  people  ;  government  again  will  react  upon  individual 
opinion,  until  in  time  these  principles  will  be  received  as  part 
of  that  accumulating  inheritance  of  settled  truth  to  w'hich  suc- 
cessive generations  are  born,  and  upon  which  they  seem  to  en- 
ter with  intuitive  sagacity,  without  any  of  those  doubts  which 
perplexed  the  minds  of  their  forefathers  who  first  received 
them.  Such  knowledge  too,  is  in  its  nature  cumulative,  and  so 
is  the  power  that  results  from  it ;  each  successive  step  renders 
that  which  follows  more  sure  and  easy — error  is  more  clearly 
discerned,  and  truth  has  greater  power  ;  and  thus,  under  the 
guidance  of  sound  and  settled  principles,  must  ensue  to  society 
a  course  of  unremitting  improvement,  unbroken  but  by  human 
infirmity,  and  unlimited  but  by  the  duration  of  the  human  race. 

This  picture,  however,  presupposes  virtue  in  the  people.  Po- 
litical Economy  is  a  science  which  guards  against  involuntary 
not  voluntary  error.  It  enters  into  harmonious  alliance  with 
religion,  but  cannot  supply  its  place.  It  must  find  public  men 
true  to  their  trust,  otherwise  it  renders  them  but  more  inge- 
nious in  their  abuse  of  power. 

Hitherto,  however,  want  of  science,  rather  than  of  virtue,  has 
stamped  the  errors  of  our  policy. 

But  ignorance  is  a  reproach  that  should  now  no  longer  rest 
upon  us.  We  have  the  wealth,  the  talent,  and  the  institutions 
that  are  needful  to  disperse  it.  Let  them  then  be  definitely  direct- 
ed to  that  object — let  professorships  of  Political  Economy  be  eS' 
tablished  in  our  colleges,  and  open  lectureships  encouraged  in 
our  cities — let  the  elements  of  the  science  be  embodied  into  the 
books  of  primary  instruction  which  are  used  in  our  academies 


laS  POLITICAL    ECONOMY. 

and  schools,  and  such  is  the  consonance  of  the  truths  it  teaches 
with  the  first  dictates  of  reason  and  common  sense,  that  the 
youthful  mind  will  imbibe  them  with  the  avidity  of  its  natural 
food,  and  the  rising  generation  grow  up  with  a  patrimony  of  po- 
litical wisdom  that  will  make  them  wiser  than  their  teachers 

that  will  require  only  the  guidance  of  conscientious  minds  to 
secure  to  themselves  and  to  their  country,  all  the  blessings 
which  temporal  prosperity  can  bestow — liberty,  peace,  and 
abundance. 

CoL.  Coll.  July  16,  1825. 


14  DAY  USE 

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